Investors typically have two goals: generate a revenue stream and build wealth.
In a world where the stock market has become volatile and bond rates are at the mercy of the Fed, investors are looking more and more at investments in privately held companies. Investors have recognized great advantages to these investments:
- The ability to touch and feel their investments;
- The ability to get to know the management team at a deeper level; and
- The ability to use their knowledge and experience to help the company develop growth strategies, avoid pitfalls and mentor the management team.
The stock price of general motors starts to drop and you have two choices: hold or sell. An investment in a private company allows an investor to be as hands on as an investor desires.
Someone contemplating an investment in a privately held company should build their investment thesis outlining the profile they are looking for in an investment. Questions to ask include:
- What is your risk profile?
- What stage of investment?
- How much are you looking to invest?
- What are the characteristics of an investment?
- Do you have a preferred industry?
Privately held companies can be a great tool to contribute to an investor meeting those two goals: Generate revenue streams and build wealth.