The Five Myths of Private Equity

Misperceptions can prevent an entrepreneur from making rational, fact-based decisions. During my twenty five years as an investor and financier, I have come to identify what I call "The Five Myths of Private Equity."
The first is that private equity is a win-lose game. In this scenario, investors win and entrepreneurs lose. This is the favorite myth of people who are looking for someone to blame for their bad choices. They didn’t read the contract they signed, they were too lazy to do their due diligence or some other negative outcome occurred which caused them to lose control of their enterprise. They’re understandably angry, hurt and looking to place the blame on someone other than themselves. According to this myth, private investors somehow make off with the value of your company; perhaps buying at a low price and cutting you out of the eventual rewards that you'd earn from going public or selling to another company. The important fact to remember is that private equity investors only make money if the value of your company appreciates. It is also a fact that, in most cases, the entrepreneur retains a substantial interest in the business. After all, it's in the investor’s best interest to help you grow your company and increase its value. So, by default, if the investor wins, the entrepreneur wins.