What makes a good deal?

The Direct Private Investments Show
What makes a good deal?

Over the years, Bruce Roberts, CEO of Carofin, has evaluated thousands of investment opportunities.  He is frequently asked why one gets the thumbs up, where most others he passes on . What characteristics does he look for?

In a recent episode of the Direct Private Investments Show, Bruce drew from 28 years of experience, sharing his insights on what makes a “good deal.”  The following article, drawn from the interview, highlights six qualities that he looks for when considering direct private investments.

The People

According to Bruce, it all starts with the people.  Strong senior management is crucial to the success of any venture.  They should understand their strengths and weaknesses and surround themselves with talented people to complement the team.  Furthermore, their employees should feel comfortable with the management team.  If they are transparent about the state of the business, honest, and invite their employees’ creativity, this will spell higher chances of success for the company.

Roberts goes on to say that the firm’s incentives should align with the investors.  A venture company should have an equity culture, not a cash culture, which means that everyone’s upside should be tied to the company’s success.

Customers and Sales

Equally important is having a solid, growing customer base and sales.  If customers are willing to part with their money to buy a product or service, it’s a strong validation of the company’s potential.  Seeing a pattern of repeat customers is even more reassuring.  Customers’ endorsement provides a solid foundation for a company to grow and, eventually, become cash-flow positive.

Financial Management

Small to medium-sized businesses, as a rule, underinvest in financial systems and controls.  Determine whether they have the proper systems in place to provide accurate data on an ongoing basis and maintain a robust CRM to manage the sales pipeline.  Note: If the principals of the firm can’t answer or satisfactorily deflect simple questions about the state of the business, from margins to accounting, it’s a red flag.


From the start, a young company faces two challenges.  The first is making a product and delivering it profitably to customers.  The second is continuing to do so while staying on top of financial management, HR requirements, administration, regulatory requirements, etc.

As companies grow, some will have hired the resources to manage these demands.  However, is every small company able to adapt as it transitions from a start-up to an operating company?  Has it built in the ability to scale as its customer base grows, does it have strong supply chains, and can original managers handle the demands of a larger organization?  Not every company is built to scale from the get-go, but investors should challenge the management to map out their plans to handle its growth.  In particular, building a strong technology solution that is robust early on is essential.

Supply Chain Considerations

In the face both of COVID and sovereign risk, Bruce underscores the importance of local, secure supply chains.  More and more U.S. companies have begun to examine their supply chains, adapting to the shifting landscape by finding or generating the ability to produce their goods domestically.  However, due to 40 years of neglect, American manufacturing’s infrastructure has deteriorated, and companies need to account for that when planning for growth and scalability.

The Great Intangible

A “Craig” — In addition to these tangible factors, Bruce revealed the great intangible element in successful small company investments: a “Craig.”  In Bruce’s company, Craig is the Chief Operating Officer who manages the minutiae of the business and solves many problems with digital solutions.  This detail-oriented problem solver allows a C.E.O. to focus on the company’s vision, without becoming distracted by all the challenges that can face small businesses.​

An entrepreneur backed by a “Craig” is well-positioned for success.  To be sure, a company can outsource numerous tasks that might distract them from their core value proposition.  However, outsourcing comes with risks, and relying on a dedicated, in-house problem solver can be an invaluable asset for a growing company.


A “good deal” in private investments, in Bruce’s’ view, is likely to get his thumbs up if the underlying company demonstrates more than a few of the following attributes.  It should have strong management, a growing customer base, proper financial systems and controls, the ability to adapt as it scales, secure supply chains, and an internal problem solver.  By ensuring that the right foundations are in place up front, investors can increase their chances of finding successful private investments.  As Bruce notes, be diligent and thorough in your assessment of potential deals to make the most informed decisions and optimize your chances of success.

Should you also care to review a closely related white paper in our Knowledge Base, you can find it here.

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