Private company investments are not readily realisable. Capital invested will be at risk and there is no guarantee of any return.
As a high net worth or sophisticated investor, you will be aware of the importance of actively managing your investment portfolio and avoiding over exposure to any asset-class. It is essential to achieve diversity, a balance of risk and return, and of course, to control costs.
AN ALTERNATIVE FOR YOUR PORTFOLIO
Private company investing adds a different source of wealth creation to your portfolio. Returns on private company investment are not closely correlated to traditional asset-classes, such as listed shares, gilts and corporate bonds.
Studies also suggest that the long-term returns of private equity exceed those for public equities and the very wealthy individuals and families (more than £10m of investable assets) now allocate on average 29% of their portfolio to private companies.
MANAGEMENT EQUITY AND PASSION
Private companies are typically managed by people with a big stake in their success. Where the average listed company chief executive owns less than 3% of the business he or she runs, private company CEOs are more likely to own around 10-20%.
But the motivation is not just financial. Private company managers are fulfilling their dreams. With their dedication and drive, supported by funding and professional guidance, these companies can transform and bring great value to investors.
THE RISE OF CROWDFUNDING
Recent years have seen the proliferation of crowdfunding and peer to peer lending platforms which offer investors the chance to access a number of seemingly exciting new business ventures. Generally, these companies are pre-profit and are seeking relatively small investment amounts. They are sold as a chance to make a ground up investment, which will take the company to the next stage and hopefully onto profitability.
However, according to data from Harvard Business School, as many as 75% of startups fail, and with crowdfunding platforms heavily reliant on such businesses the risks are clear. Granted, the returns on
offer can be high, and the key to success in this model of investment is to utilise small amounts across a large number of companies.
BARRIERS TO ENTRY
Anyone looking to access this asset class outside of crowdfunding can find themselves facing difficulties. The time and expertise required to assess the viability of a business creates a barrier to entry for most investors, whilst also increasing potential risk.
Historically, this has seen many investors turn to private equity funds. The problem is that funds give investors little visibility on where and when money is invested and a lack of information on performance.
THERE IS ANOTHER WAY
Sophisticated and high net worth investors are increasingly choosing to partner with professional private company investors such as Rockpool to give them direct access to opportunities beyond the start-up phase
THE ROCKPOOL APPROACH
Our team of investment experts spend thousands of hours digging deep into the businesses and the background of the management, as well commissioning expert due diligence.
The detailed information on the business, market, management team, financial forecasts and investment returns are collated into an investment memorandum which is sent to investors to review.
The power of our network is also an important resource. There is an enormous variety and depth of business experience amongst the individuals who make up our network. Access to this can help inform our investment decisions and strengthen management teams.
Our network is made up of more than 3000 investors and is growing. Members share the common goal to add diversity to their investment portfolio for better returns.
To date, Rockpool investors have invested in excess of £350m into 75 companies, providing returns of £57m.
TRANSFORMER COMPANIES OFFER VALUE
Our focus is on small founder-led companies which are profitable, growing and have annual revenues of £5m or more.
With the support of our experts and the investment from our network, these companies can transform into professionally managed stars, positioned to attract private equity funds and trade buyers.
BUILDING A PORTFOLIO
Building a blended portfolio of loan and equity investments can help to achieve a balance of risk and reward. Using different investment vehicles such as a company, SIPP and IFISA can also help enhance returns through tax-efficiency.
We offer access to your investment information via our on-line platform and report regularly on all the companies in your portfolio. Our investment team monitor the companies during the lifetime of the investment.
There are some drawbacks to investing in private companies. It’s rarely possible for an investor to sell at the time of their choosing. Instead investments are realised by an exit arranged by the company or manager acting for all investors or a repayment of loan capital.
Amongst our network you will find business leaders and owners, professionals from law and accountancy and individuals from different investment fields. A wide variety of backgrounds but
a common ground of being interested in how they can build and protect the wealth that they have accumulated.
Joining our network is free and comes with no obligation to invest. It means that you’ll receive notification on the investment opportunities as they’re launched.
Registration is easy through our website at www.rockpool. uk.com and you can expect a call back from a member of the team to introduce you to the company and to give you the opportunity to ask questions after you’ve registered.
ABOUT THE AUTHOR
Matt Taylor is founder and Managing Partner of Rockpool Investments. He has over 25 years of experience working with entrepreneurs and leaders of smaller companies.