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1.0 Executive Summary
The purpose of this business plan is to showcase the continued development and expansion of a technology-focused private equity firm with offices in New York City, New York. Private Equity Firm, LLC (“the Company”) will operate as the General Partner of the Limited Partnership. The Managing Director of the firm is Matthew Davidson. The Company is seeking $75 million in order to commence operations. The business will focus heavily on making investments into established businesses with a focus on artificial intelligence in healthcare applications.
1.1 Operations
The business, through its operations, will maintain a diverse portfolio of private businesses that operate within the technology sector. The business will invest, from time to time, in entities that are in their pre-revenue phase. This will allow Private Equity Firm to capitalize on startups that have promising technologies that can be brought to market.
In regards to fees, the Company will receive an annual fee equal to 1% of the total assets under management (AUM) as well as 20% of all distributed profits.
The third section of the business plan will focus on the investments that Private Equity Firm, LLC will make over the next three years.
1.2 Financing
At this time, $75 million is sought from up to 99 investors for the Company’s limited partnership. The terms of this investment can be found in the accompanying private placement memorandum. Of this capital, approximately 95% will be used for direct investment purposes while the remaining funding will be allocated towards working capital.
Moving forward, the business portfolio companies may be leveraged in order to expand the returns on investment achieved. The Company may also work with qualified investment banks that will underwrite securities during the course of initial public offerings. This will produce substantial profits for the business while providing substantial capital for reinvestment.
The Company, in its capacity as general partner, will also make direct investments into portfolio businesses in order to align the firm’s interests with those of the investors.
1.3 Mission Statement
Management’s mission is to provide investors with outstanding returns-on-investment via a diversified portfolio of companies that produce emerging technologies.
1.4 Management Team
Private Equity Firm, LLC was founded by Matthew Davidson. He has 15 years of investment banking and private equity experience. He will be able to source economically viable technology investments for the firm’s portfolio.
1.5 Income Forecasts
1.6 Expansion Plan
Over the next three years, the Company will make sustained investments into new technology firms while concurrently increasing its capital base through additional limited partnerships. Private Equity Firm, LLC may also partner with other firms in syndicated deals.
2.0 Company and Financing Summary
2.1 Registered Name and Corporate Structure
Private Equity Firm, LLC. The business is registered as a limited liability company in the State of New York.
2.2 Required Funds
The $75 million to be invested into the business will be allocated as follows (with portfolio capital going into the limited partnership):
2.3 Investor and Management Equity
Please reference the Company’s private placement memorandum for these details.
2.4 Exit Strategies
In the event that Management wishes to sell the business, the Company will coordinate with a qualified investment bank to make arrangements for the sale of the General Partner to a third party firm. Given the highly predictable nature of the revenues produced from AUM fees and anticipated profits from portfolio business sales – the entity could be sold for up to six times earnings. This event is not expected to occur for a substantial period of time.
3.0 Investment Operations
As discussed in the executive summary, Private Equity Firm will provide its investors with broad access to high-quality technology focused investments that will produce substantial profits in the form of both recognized capital appreciation and dividends. As it relates to the technology firms that will be held as portfolio companies, the business will focus on AI and healthcare driven enterprises as these entities are relatively immune from negative changes in the economy. The demand for AI integrated healthcare technology is expected to exponentially grow over the next ten years.
The Company will focus on providing Series B funding to its portfolio businesses. This will reduce the risks normally associated with seed capital and Series A funding. From time to time, the business will engage in early-stage funding for highly promising ventures.
As part of the Company’s due diligence, the business will focus on making investments that have anticipated compounded annual returns of 30% to 50% per annum. The average time that the business will hold a portfolio company will be three to five years.
In regards to cash management, Private Equity Firm, LLC will hold its capital in money market accounts and broad based ETFs during the time that these funds are not deployed. This will allow for modest capital appreciation, interest income, and dividends to be produced.
4.0 Strategic and Market Analysis
4.1 Economic Outlook
At this time, the economy is doing remarkably well. Although issues with inflation and high interest rates occurred over the past several months – these matters are not abating as a result of the proper fiscal and monetary policies implemented by the US Federal Reserve and global central banks.
However, any issues with the economy will not impact the Company’s ability to generate revenue. The business will work with portfolio companies that have immense potential as it relates to capital appreciation through their eventual sale or IPO. Additionally, many of the investments undertaken by the business will be focused on the healthcare sector which is wholly immune from negative changes in the economy. Private Equity Firm, LLC will maintain controllable operating costs, which will further reduce economic risks.
4.2 Industry Analysis
There are over 9,000 companies that manage limited partnerships and investor capital with the intent to make investments into third-party enterprises. Aggregately, these companies produce over $200 billion of revenue each year. It should be noted that some of this revenue represents profits from equities trading.
This is a mature industry, and its future growth will be similar to that of the economy as a whole. One of the most important functions of these firms will be to provide capital for promising startups into ventures that focus on AI and healthcare. These industries are experiencing rapid rates of growth given the number of emerging technologies that are being used to help people with their health. Private Equity Firm, LLC will capital on these growth trends throughout the life of the limited partnerships.
4.3 Customer Profile
Private Equity Firm will only source capital from accredited investors. The Company’s investors will consist of high-net-worth individuals, banks, investment firms, and pension funds. The Company will coordinate its marketing efforts with a properly licensed capital introduction firm in order to remain within the letter of the law as it relates to the sale of private securities.
4.4 Competition
The Company, as it relates to receiving influxes of capital for investment, will face substantial competition from established private investment vehicles domestically and internationally. There is an immense demand among these firms to place capital with highly promising technology firms. One of the ways that Private Equity Firm, LLC will maintain a differentiating factor is that the business will specialize in companies that are producing unique technologies for the healthcare industry.
5.0 Marketing Plan
The ongoing marketing required by Private Equity Firm, LLC will be highly focused. This is primarily due to the fact that the business can only market its limited partnerships to specific groups of individuals that are considered either qualified or accredited investors. As discussed earlier, the business will only work with people that are considered accredited investors in order to reduce compliance risks.
5.1 Marketing Objectives
• Foster ongoing relationships with capital introduction firms throughout the United States to source investors for the firm,
• Maintain an expansive online presence that features access functionality for people that have been confirmed as accredited investors.
• Enroll among numerous organizations that focus on private investment vehicles.
5.2 Marketing Strategies
Private Equity Firm, LLC will use numerous laser-focused marketing strategies that will allow the firm to be quickly found when investors want access to firms that provide capital for healthcare enterprises. The business will coordinate its capital raising efforts with introduction firms that will showcase the investments. This firm will receive a commission on each investor that places funding with the Company.
In regards to the Company’s website, this platform will be developed with ongoing advisory from the business’ attorney. This will ensure compliance with all regulations that address capital raising among private securities. The platform will showcase the portfolio companies as well as the overall investment philosophy of the Founder and Management Team. The biographies of all staff members will be featured on the website as well.
The business as well as all members of the Management Team will frequently attend events specific to the private equity industry. They will also become members of numerous organizations and associations that focus on private investments.
It should again be noted that all advertising and marketing efforts of the Company will be cleared by the business’ securities attorney.
5.3 Revenue Overview
6.0 Organizational Plan and Personnel Summary
6.1 Corporate Organization
6.2 Payroll
7.0 Financial Plan
7.1 Underlying Assumptions
• Private Equity Firm, LLC will acquire $75 million. Of these funds, 95% will be allocated towards the limited partnership.
• The Company will receive an annual fee of 1% of assets plus 20% of all recognized capital appreciation, dividends, and other profits.
7.2 Sensitivity Analysis
The Company’s revenue will be relatively immune from economic recession. This is due to the fact that the business will be primarily engaged in healthcare focused investing, which is a necessity in all economic climates. Although it will take some time to recognize capital appreciation from portfolio company sales, the firm and its limited partners will recognize dividend income in the interim. This will support the operating costs of the firm.
7.3 Source of Funds
7.4 Profit and Loss Statement
7.5 Cash Flow Analysis
7.6 Balance Sheet
7.7 Breakeven Analysis
7.8 Business Ratios
