When I look for unique ways to approach the private equity markets I sometimes ask myself, how do the current venture capital and private equity models currently work? Venture capitalists typically utilize proprietary deal flow, unique skills, relationships, reputation, and Limited Partners’ dollars to buy sizable chunks of tomorrow’s innovative publicly traded giants. Ideally you can “Buy low, sell high.” It is always important to remember that if you believe in efficient equity markets or “Random Walk Theory” then it is critical to buy well, because the market will dictate the exit pricing.
I have noticed a specific trend forming with the business models and companies that I like to work with. They fall into five groups: (more…)