Australian entrepreneur and investor Darren Herft has years of experience in the private equity space, and first developed a passion for company growth when he was a university student.
“I quickly became more interested in the funding space for companies looking to grow,” says Herft.
Put simply, Darren Herft says the definition of private equity is in the name – an equity style type of funding, and not a debt type of funding. The reason why it’s called ‘private’ is because it’s not public funding.
“Public money often comes from a share market, where you can raise money on a market if you are looking for funding,” says Herft. For this reason, private equity is perfect for those earlier stage companies looking to grow as fast as possible.
Herft says private equity funds have become exceedingly popular over the past 30 years.
Deloitte also released a study in late 2020, highlighting the formidable and continued growth expected in the private equity market. They projected that by 2025, there could easily be $5.8 million USD under management by 2025.
Another study released by McKinsey & Company called this a “turbulent start to the decade” for private equity markets because of COVID-19. They reported fundraising volatility, but despite this fact, in the first half of 2020, private equity continued its march upward and grew by 5.1 percent. This placed private equity assets under management at $7.4 billion.
These stats show both the extreme growth potential and the somewhat unpredictable nature of the private equity market, especially in the face of a global pandemic.
One of the attributes about private equity that interests Darren Herft the most is figuring out how to acquire funding for companies looking to grow.
“Helping a company is about more than just profits,” says Herft. “It’s also about providing jobs to the people it will employ and the services and benefits it will provide to the public.”
While banks and traditional players tend to lean more conservatively in which ventures they finance, private equity players are eager to seek out new opportunities and pinpoint disruptive technologies because that is where the growth potential lies.
Darren Herft says humanity wouldn’t be where it is today if it had not been for new ideas and the valuable technologies brought about by them. Learning how to recognize these new technologies and be a fundamental part of getting them off the ground is part of what makes private equity so rewarding and interesting.
Darren Herft also says that a good idea is not enough to qualify a company for private equity. It takes rigour and originality among other things to build a strong and viable startup.
“Investors want to see that individuals are driven, especially if their venture is a startup. It’s a difficult game and it needs people who are entirely committed to the cause.”
Herft says it’s also important for private equity investors to determine which position they would like in a company rather than simply deploying their capital.
A couple of key questions are, “How involved are they willing to be in board structures and their roles in their acquisition, and what position would the investor like outside of the funding they are putting in?”
Private equity continues to be a highly sought-after avenue for early stage companies seeking funding, as well as established businesses.
Major players in the private equity arena are not shying away from acquiring new ventures, and the global private equity market continues to show promise for rapid growth.