One of the companies that I own is GranResources, LLC www.granresources.com which provides intermediary services through our Capital Sourcing program. This program involves pairing quality companies with either Private Equity (PE) or Venture Capital (VC) firms.
Typically, here are the different ways PE firms invest in companies:
1. Complete buy-out — they buy 100% of the business
2. Majority buy-out — they buy 50%+ of the business
3. Minority investment — they buy a non-controlling interest (equity position)
4. Debt investment — they do not have any equity participation and only get paid the interest and principal. This is usually called a mezzanine or sub-ordinated debt investment.
5. Any combination of the above. Normally an investment in a firm involves both debt and equity participation.
6. Debt and minority positions are usually used for growth or expansion capital.
7. All of these structures have various names such as: Recapitalization, management buy-out, growth capital, expansion capital, minority investment, control investment, mezzanine debt, sub-ordinate debt, spin-off buyout, etc.
8. The general guidelines for interest are a profitable company, who has been in business for a minimum of five years, and has annual sales of $10 million or more.
Below is information regarding VC firms:
1. Location — they want to be near their money and the businesses they invest in.
2. Size — generally less than $5 million. Usually dole out the investment in several rounds as the company needs it.
3. Stage — there are several different stages such as:
3a. Seed — no income, few employees, earliest stage of a company
3b. Early stage — may have started operations, may have some customers, little to no product
3c. Late stage — already producing income, probably not profitable
3d. Growth — close to or already at break even in income, need more to ramp up operations to actually start building the company.
4. Industry — VC’s are very niche industry specific. They don’t have broad investment strategies and generally focus on a very small area of an industry. This is due to the knowledge & skills their employees have.
5. Success Rate — 99% of the time no funding will be found.
6. Exit strategy — the company has to grow big enough to where the VC company can somehow realize its investment such as through a public offering.
The Capital Sourcing service we are offering will not have any up front costs to you if your opportunity is of interest to a PE firm. If a deal is ultimately completed then we are paid a fee by the Private Equity firm – if no deal is reached then we receive nothing. However, if your opportunity is more suited for a VC capital firm then we will have to discuss our fee which would be paid by you should a deal be reached – if no deal is ever reached then there will be no fee charged.
We will analyze your opportunity and give you our recommendations whether it should be pursued with a PE firm or a VC firm – we do not deal with Angel Funds.
If you have an interest, or questions, please contact Bob Grant at GranResources@gmail.com , visit our website www.granresources.com , or call 816-510-4600.
Regards -
Bob Grant, President
GranResources, LLC
Kansas City, Missouri
Ph: 816-510-4600
