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Self Directed IRA Private Equity Investing – A Due Diligence Walk-Through

October 4, 2021

 

 

Hey Everyone.

It’s Brian Poss, Director of Marketing at NuView Trust here.  Welcome to part two of our private equity video series.

In this video, we’re going to go over:

  1. How you find deals
  2. Websites you can use to find private equity deals
  3. Performing due diligence.

Most importantly, we’ll discuss what you need to look for on some of these sites to understand the investment that you’re investing in.

Websites You Can Use To Find Private Equity Deals

There’s a couple of different sites that offer private equity investing information.

Like I said, with most of these sites, it doesn’t matter if you have a large account or a small account, everything goes. That’s why I love private equity investing because you don’t need a large account.

And with some of these investments, you can invest as little as a hundred dollars. It’s a great tool for younger investors out there, as well as older investors that have larger accounts.

Please note:

I’m not going to go into each of these sites. I’ll go into my last one – which is my favorite – but I’m just going to go through the different sites that are out there.

The first we’re going to look at is OurCrowd. This is another site that offers a lot of investing. You can go on here, set up an account and get started doing your research for investing opportunities.

Seedinvest is great site. It’s easy to navigate, and you’ll find a lot of good private equity deals on here.

There’s FundersClub. This is another good site. It’s designed really well. There’s a lot of opportunity on here.

Then there’s MicroVentures. This is probably my second favorite site to go to. I really like this site. I actually use it myself.

And then there’s my favorite, which is Wefunder. I really like Wefunder. I really like how the site’s designed, but there’s a lot of private equity deals on here.

This is the primary site I use when I invest in private equity.

What Information Do These Sites Offer Investors?

It’s really easy to go on these sites and find private equity deals.

They usually have investment opportunities in several categories like:

  • Technology
  • Main Street Investments
  • Alcohol Beverage
  • Food
  • Hardware
  • Infrastructure
  • Retail
  • Entertainment
  • Software
  • Etc.

Like I mentioned before in my previous video, software is my favorite. That’s the category of deals I look for.

So, if you subscribe to one of these sites, all you have to do is log in and view all of the opportunities they offer.

Which deals are the best ones to invest in? Again, that’s up to you.

That’s the beauty of self-direction is you’re in the driver’s seat. You’re making the decision.

Due Diligence is Critical

As part of the process, you have to do your due diligence.

Click on any of the opportunity listings to do the research.

That’s why I always say: you have to find an industry or something that you’re familiar with.  I do software, like I said, because I’m familiar with it.

So, as you scroll through opportunities on the site you choose, you’ll often see some bullet points about the company you’re considering investing in.

Some of the details you should look for include:

  1. How much money have they already raised?
  2. Which large or well-known companies back them?
  3. How many customers do they have?
  4. What’s their annual market potential or target market size?

A Walk-Through of Due Diligence With a Private Company

Let’s do a walkthrough of what I look for when you’re evaluating private equity deals.

The first thing you want to do is if the company has a video, watch it.

Get an idea of what their marketing is like. Figure out who’s working at the company. Determine what do they do?

Typically, on the page describing the opportunity, you’ll find other key investment details.

You’re going to want to look at the highlights for this particular company.

  • What’s good about the company?
  • Why should you invest in the company?
  • Is the company growing?
  • Do they have an established pipeline?
  • Do they have a management team that has a track record of success, IPO’s, acquisitions, etc?

Success Can Follow the Right Management Team

When you see their management teams or executives listed, take that due diligence to the next level.

Look up their social media profiles. Get a feel for if this is a good executive team.

  • What have they done?
  • What companies that they’ve worked at?
  • Did those companies grow?
  • Were they startups that went from 20 people to a hundred people?
  • Did they help those companies go IPO?
  • Were they sold off to another private equity firm?

You need to go through this information and look at every one of these key players.

If you see some people on there that don’t have that experience or don’t have that success, it might be a red flag.

And remember, there’s are tons of companies on these websites. So, you don’t have to invest in any company you don’t feel strongly about.

Look at the Company’s Marketing

After looking at all the executives, continue looking around for some of their marketing details

Look for some of their potential clients, or if they have partnerships with large or successful companies. Can you understand if their pipeline is strong?

Look for anything that reveals how their business serves their audience.

  • If they offer a product, get a feel for how they communicate that to the marketplace.
  • If they offer a service, look at how they deliver that service to the target market.

The Profit Potential is in the Details

If you follow our advice and stick to looking for investments in industries that you are familiar with, you should be able to tell if the company offers anything innovative or advantageous to the audience.

  • What are the features of their product?
  • How much easier is it to use?
  • How much faster can it solve customer problems?
  • Etc.

It’s critical that you do this for every potential company you’re going to invest in.

Sales Projections And Financials Are Key

Next, you want to look at their sales projections. You need to review all the financial information.

You need to understand:

  1. What their sales are
  2. What their cost of goods are
  3. What their cost of manufacturing is.

If their sales are lower than their manufacturing costs, that might be something to shy away from because that shows they’re not profitable. But again, it depends on what stage they’re at. If they’re early stage, a lot of times you’ll see companies that are not profitable.

With that said, in the stock market there are companies that are not profitable but currently trading at 10 times their valuation it’s. So, exercise some of your own judgement here please.

You should also look for anything about the total accessible market for this company’s product, service, software, etc. If they can get 1% of that market, is it a lot of revenue? If yes, then that’s something to consider in your decision-making.

Do they have customer testimonials?

If the company profile has customer testimonials that talk about why they like the product, watch or read those. Figure why they’re a customer. And make your decision on if investing in this company’s offering is a good choice for you.

Is Private Equity Investing Worth it?

I love these sites because they have literally everything you need to get going and potentially invest.

And like I mentioned before, it doesn’t take a lot. You can, you can invest as little as a hundred dollars with great returns.

In my previous video, I talked a little bit about pre-IPO valuations versus public valuations of the company. There’s a lot of opportunity.

For example, when Facebook was in its early stage, if you invested, you probably made millions off of that. Even if you invested a hundred dollars, by the time Facebook when IPO, that a hundred dollars could have grown to $50,000.

Hopefully this video was, was helpful.

And again, this is not meant as financial advice. These ideas are just some quick tips to get you guys started with using some of the tools that are available to find deals, and to start investing.

Like I said, the most important thing that you can do this type of investing. You don’t have to sit on the sideline because your money doesn’t do anything parked away.

And to open a NuView account, all you have to do is call one of our IRA specialists, and you can get started today. It’s that simple.

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