Carrefour, a French company and the second largest retailer in the world, had their big shareholders 7 Private equity is roiling the economy, CNN Money, March 5, 2007. 88 CHAPTER 4 make the request to behave as if they had a private equity partner, like Blackstone or Onex, for example. Th ey sold off real estate and invested in other longterm activities as a result. BuyOut Financing Th e IPO used to be like reaching the top of Mount Everest for entrepreneurs, but even fi nance has its fashions. Th e company would be listed on the stock exchange and then have a good supply of capital from all the happy investors. Th e VCs, fund managers, and management would all get their investment returned and then some. In real life, it doesn’t always work that way, which is why getting bought out by a U.S. company is attractive. When the Canadian company is in the same line of business, it oft en attracts a premium sales price and the parent company is motivated to pump in more capital ensuring continued success. Going public can get quick cash but then interest by investors may drop, especially for smaller stocks, leaving the stock “orphaned.” Th e CEO may struggle to raise capital and also pay the accounting fees required. Choose Your Type of Investment and Investor Now you have learned about angel, seed, venture capital, institutional funds, and banking, you can understand the diff erent roles each plays. It is a bit like a Sudoku puzzle, but once you fi ll in key information, the rest falls into place. You can see there is a path for every company with required steps that your investors today and your future investors will want to see. No one can predict your future, but they can get a gut feel from the milestones behind you. Dig for Detail Before we turn to the question of what we need to do to get funded, it might be worth a fast cruise past all the potential investors out there again and what exactly they need before they give you a single dollar. Th ere are proper roles for bank fi nancing and private equity to help you along your path. Th ese next few chapters will teach you when to use The Food Chain: Match Your Business with the Right Investors 89 each type of capital and how to work with each investor. First up are the angels. Let’s learn how to get a little bit of heaven! Just as in everything, there are right and wrong angels and you need to recognize the right ones. Th en we will visit the VCs and, last but not least, the private equity fund managers. TAKE AWAYS Th ere are many sources of funding out there, all wanting to put their money into growing businesses. Your opportunity to get some of that money just increased because you now know where to narrow your search. Pick your size of business and amount of capital required, then match yourself to the correct type of fund. Th e “fi t” between your business stage and the private equity fund’s investment criteria matters.