A liquidity event is an event in which the shareholders of a company receive the opportunity to receive liquidity for their position in the company. Examples of liquidity events include:

• Merger or acquisition
• Public offering

Companies can also build in synthetic liquidity events for investors. For example, redemptions, interest, balloon dividend payments or extension payments.

A minority investor in a private company’s biggest fear is that the company will grow and become successful, but that they will continue to remain private with no liquidity events. If this was the case, the investor would have nothing to show for their stake in the company.

When a liquidity event is planned or structured for the near future, most investors are much more likely to invest in or lend to a company.

You can spend weeks analyzing comparables for your company, but at the end of the day, your investors will determine your company’s value. Additionally, there are always ways to claw back dilution later on. We always say, the most important valuation is the one that get your company funded.

Regardless of company stage, it’s very important to prepare your company prior to seeking funding. This includes preparing all of your corporate documents, preparing historical financials, preparing financial projections, and putting together an effective and aesthetically pleasing investor presentation.

When investors invest capital into a growing company, they are betting on the management team as much as, or more than, they are on the products or services. Knowing how to highlight your management team’s relevant experience can make the difference between an investor passing on an investment and putting in capital.

If your management team does not have very extensive or relevant past experience, it can help to add board members or other advisors who have great experience and can provide guidance.

Our approach depends upon accessing our personal relationships. Our experience is that personal relationships are far more likely to spend the time reviewing the opportunity, and more likely to invest.