Secure funding for the future
While all businesses need capital to grow, funding decisions can be fraught for entrepreneurs as they debate the merits of private equity vs. going public. For those considering private equity, they need to decide what’s important for the longer term, make sure everyone is aligned to the same goal and ask lots of questions.
“A private equity investor can challenge decisions, and that can lead to great decisions,” said Constantin Schön, Managing Director of Apollon SE, during a panel discussion.
When working with private equity, despite the importance of data, personal fit is important. Private equity invests in the people running the business, and entrepreneurs should take the same care over selecting their investment partners.
“There is nothing typical in the private equity world anymore,” said Kath Carter, EY Global Strategy and Transactions Markets, Accounts and Business Development Leader. “This means you can find the right fit for you. It’s like a marriage.”
Alternatively, with high stock valuations and low interest rates likely to remain for the foreseeable future, many entrepreneurs plan to fund their growth by going public. The process can help founders professionalize their business because of the governance required.
Find allies for growth
With funding secured, leading entrepreneurs have one path to growth. But businesses rarely evolve solely by organic growth. Strategic acquisitions offer a popular means to enhance market competitiveness and profitability, but entrepreneurs are increasingly looking toward partnerships — even with competitors — to build their profile.
José Shabot Cherem, Founder of Quiero Casa and EY Entrepreneur Of The Year 2018 Mexico, is dedicated toward breaking the cycle of poverty by building affordable homes that are close to transportation and workplaces. Part of that mission has seen the company financing its competitors.
“We feel that the market is too big,” Cherem said. “We couldn’t reach the whole market ourselves, and if we wanted to create an impact, we needed competitors to join forces with us. So we finance them, we provide them with technical advice, and through that we create a larger impact in residential housing in Mexico City to create a better city.”
When it comes to more traditional transactions, PPC’s Pritzker advised that it pays to know the dynamics of an industry. “There’s so much money chasing deals that if you don’t know a certain area, you just don’t have a good advantage,” he said. “Things are going to cost too much, and you’re going to make a mistake.”