“PE” funding or “private equity” funding is a more serious sort of funding that is relevant once your business is more established and has proved its concept, but where the founders have exhausted all forms of early stage funding as mentioned above.
PE houses are companies into which big pension funds and other institutional investors invest into who have large pots of cash to invest in high growth businesses that have proven management teams but are cash constrained. Thus PE funds look to fund growth plans.
They typically hold their investments for three to five years and then look to “exit”, which means sell or “float” the company and often look to double, triple or more their investment.
A PE house will conduct serious due diligence on your business, will often bring experience and skill to the management team (and may require that you use some of the funds they lend to hire finance, human resources, IT specialists and management etc).
PE funds will probably not lend less than £5 million. Some funds have a “sweet spot” of that level of investment. Others have a sweet spot of £100 million or £300,000 million.
They will always take an equity interest in your business but will generally lend you debt as well (thus the term sheet – which sets out the basis they will invest – will be complicated) and you will need experienced legal counsel to negotiate on your behalf.
For more information about Olswang go to http://www.olswang.com/main.asp?sid=193