Every investor dreams of discovering the next Facebook, Uber, or Amazon "but they also know that it's much easier said than done.
Attaining this level of ROI requires considerable research and a deep understanding of key market segments and relevant players. It means recognizing the potential of early-stage companies and proactively building relationships with them, all while under the pressure of beating your competition to the punch.
Getting an edge over other successful private equity (PE) and venture capital (VC) firms means understanding how to identify and connect with prime investment-ready targets faster, earlier, and more effectively. In this guide, you'll gain an insider view into top M&A research tools and strategies, learn how to find private company revenue and other key data points, and much more!
Before we dive into best practices around how to research private companies, it's important to first understand what a private company is and how it's different from public companies. This will dictate the type of data you need to find.
A public company is listed on a stock exchange, and shares are available for purchase to the general public. Data about public companies is easy to find, since most materials are published by the brand itself or have been made public through the SEC. It's readily searchable through Google and researchers can easily find information like company revenue, year-over-year growth, number of employees, and much more.
So, what is a private company? These companies can be separated into two buckets:
While a quick Google search can tell an investor a lot about a public company, finding operational and revenue information about private companies is a different story. Even large private companies (such as Cargill, with an estimated $113 billion in revenue) have no obligation to disclose financial or operational data.
While investor-backed private companies often announce funding rounds and customer wins that can give firms an idea of their size, growth, and revenue, bootstrapped private companies are tighter lipped. What's more, the earlier a company's stage, the more likely investors will factor technology, executive experience, key milestones, the competitive landscape, and other types of information into the company valuation.
In fact, more firms are beginning to develop proprietary models and projections that use data points like these to determine bootstrapped company growth trajectory and investment readiness in the absence of readily available revenue data.
In addition to basic company profile information like industry, year founded, location, and product names, Sourcescrub has broken down the private company data signals investors should pay attention to help them answer questions like:
These data signals can be bucketed into 9 distinct categories:
We've already noted that private and especially bootstrapped company data is difficult to come by. So where is the best place to find this type of information?
Using a variety of data sources will help you discover and put together scattered tidbits of private company data into one cohesive analysis. Checkoff all of the following resources to build an informed understanding of potential opportunities that give you an edge over competition:
1. Private Company Websites
Today, virtually every company has a website. These websites typically outline the company's products, solutions, management, investors,money raised, board members, open positions (in the Careers' section), press releases, conference attendance announcements, and media coverage.Additionally, websites offer resources such as whitepapers, ebooks, videos, and blogs - all of which provide key insights into a private company.
2. Social Media
Many private companies, especially those in the B2C space, use social media as a key channel for customer acquisition, feedback, satisfaction,and retention. Therefore, monitoring a private company's social media presence can offer additional insights, especially on its existing portfolio of customer-facing apps, products, and solutions.
3. Online Job Sites
Most private companies use online websites (LinkedIn, AngelList,etc.) to recruit employees. Requirements for open job positions offer compelling details on the skill gaps that private companies are trying to fill,which may reveal product plans, technology direction, marketing strategies,geographic expansion plans, etc. Moreover, trends in the number and nature of advertised open positions are key indicators of private company growth and product/solution evolution.
4. Online Employee Profiles
Employees at most private companies have profiles on professional networking sites such as LinkedIn, where they list qualifications and employment timelines, publish professional articles, or like/comment on others' posts. Employee activity on professional sites often reveals a lot about a private company. When employees leave companies, many of them turn to workplace review sites (such as Glassdoor) to leave comments about their employer, their bosses and colleagues, and corporate culture - all of which is valuable information for investors or acquirers.
5. Trade Shows
Private companies attend industry conferences to scope out the competition, meet potential customers, and even connect with investors. Firms often review trade show attendee lists and go to events that target companies plan to attend. Once there, it's possible to meet and strike up a conversation with their founders and executives to learn more about them.
6. Industry News and Articles
Private companies love free promotion, so founders and executives will often volunteer to share their opinions on technology and trends in various news articles. This can offer insight into how they intend to disrupt their market and the challenges and opportunities they expect to face.
So, private company data is out there. But how can investors most efficiently gather all of this disparate information?
In the past, investors had no choice but to manually piece together information from across these different data sources in an attempt to create a cohesive, multi-dimensional picture of target companies. This process doesn't take minutes or hours "it takes days and weeks. And all too often, the end result is laden with inaccuracies and outdated information that causes firms to lose deals.
Fortunately, today there are new school private company intelligence platforms that use a combination of advanced technology, artificial intelligence, and human quality control to capture millions of data points across online and offline sources. These tools curate this information to create robust, reliable private company profiles that investors can use to efficiently identify, research, and connect with bootstrapped businesses.
In a nutshell, a well-designed pure private deal sourcing platform can:
Ultimately, the secret to getting a distinct edge in delivering benchmark-beating ROI comes down to where you look for data, what data you look for, and the tools you choose to discover and assess it all. Get started researching private companies with Sourcescrub's deal origination platform today by requesting a demo!