” Ouch!Th e private equity universe comprises large fi rms that dominate in the media, but it is the thousands of small fi rms that account for the majority of private equity. Each of these brave companies take on risk and the smart business owner realizes that this means they are asking investors to place their bets on his horse, his business, his word. Private equity investors oft en borrow money to put into companies they believe have the potential to grow with the added capital, a more savvy strategy, and a boost in skills. Th is makes investing stressful and brings the decisionmaking razor blade close to the investor’s jugular. If they see a CEO who has not taken the time to prepare well, who has not risked much of his own money in his business, and who has the cheek not to do research on who he is meeting with, why should they hand over cash? Would you? 3 Interview, Greg Milavasky, Canterbury Park Management, Toronto, December 4, 2007. 54 CHAPTER 3 They Could Lose It All with You “Private equity is the nose of the hound dog,” says Jeremy Rifk in, futurist and author of Th e End of Work. Rifk in believes there is a third industrial revolution building with the support of this new economic framework. “Private equity is on the vanguard of the revolution. Th ey are there because they can take the risk.”4 Exactly! Th e bottom line is that private equity is amazing with the risks it takes and how it gets behind a business owner. Aft er all, private equity puts in a huge dollop of capital and unlike the bank, does not get it back in the form of monthly interest payments within a month or so. Th ey will put their time and energy into building the growth of the business, another activity you will not see your local bank manager doing. Th is is a serious amount of money and eff ort invested upfront before getting back their investment or a cent of interest repayment. You see, private equity sounds awfully glamorous and wealth generating, but in reality, for every successful private equity investment cruising the highway in triumph, there are many driven off the side of the road, burning horribly in the ditch. No wonder they need to see the facts, ma’am, just the facts-the fi nancial story. Figure 3.2 contains a list of questions investors will want you to disclose quickly when they fi rst hear from you. Th ey will probably want these answered over the phone, before they meet with you. Be ready to lay out this information when asked, “Tell us about yourself.” Th ey don’t mean where you were born or went to high school. In fact, the investor is asking you to present your business because it illustrates how you sell to your customers. Be factual, honest, and powerful in your knowledge. 4 Jeff Sanford, “Private Equity,” Canadian Business Online, March 23, 2007. The risk is substantial for the private equity partnership, and investing in companies is not seen as the opportunity to simply sit back and pull money from an ATM machine.