The Direct Private Investments Show
Are you interested in learning about the world of private investments and how Carofin determines whether each investment opportunity is viable? This article, drawn from The Direct Private Investment Show, should help investors appreciate the steps that our experts follow and incorporate them into their routines.
In this episode, host Matt Brown joins Jason Washington, Josh Green, and Nash Roberts (descriptions here ) who provide valuable insights into the due diligence process essential in determining the viability of investment opportunities.
Together, they describe the process Carofin’s analysts and investment bankers follow when determining the viability of a new opportunity. Is this an issuer that Carofin feels comfortable supporting? Does the business model make sense, and are there customers ready to buy its products or services?
They assemble background information about the company and its management team and begin to sense the security that will work best for the company while offering a good risk-reward scenario to investors. Once prepared, they bring it to the Investment Banking Committee (IBC). Here, Carofin principals review the deal, probe where they feel the team needs to gather more information, and draw upon their decades of experience to guide the team to a deeper understanding of the industry, potential risks and safeguards to consider.
Most opportunities don’t make it past the IBC. One critical determinant to a go/no-go determination is the level of speculation risk. The Carofin team evaluates the company’s industry to determine whether the risk-return profile is too speculative. Examples of industries that Carofin feels are too risky include cryptocurrency, the emerging marijuana industry, and the cells, genes and molecules vertical of the life sciences industry.
However, once approved by the IBC, the real work begins. Carofin conducts background checks on the principals of the company and searches UCC registrations to determine if there are any liens and judgments. Financial and market due diligence follow to determine whether the company in good standing. The team reviews the company’s financial statements, their projections, and their business model to grasp whether the company is likely to execute their plan. Along the way, the team helps anticipate potential issues with which investors should be concerned and addresses the questions proactively. Our Knowledge Base has an article that can provide additional color, called “Due Diligence and Investments: What do I really need to know?” Find it here.
This episode also discusses some common issues that arise between the company principals whose needs conflict with those of potential investors — and the strategies that Carofin employs to create a viable balance for these parties.
If you are interested in learning more about the due diligence process and how Carofin uses it to determine each investment opportunity’s viability, be sure to check out the Direct Private Investments Show. With Carofin’s team of experts, you are sure to gain valuable insights into the world of private investments and the care we take before bringing an opportunity to you.
Watch the full episode here. In addition, if you’re interested in looking at what’s currently available at Carofin, please click here.
Timestamps:
[00:02:53 – 4:10] The viability of investment opportunities
[00:04:11 – 6:08] Why Carofin typically avoids certain Industries
[00:06:28 – 07:54 The number of opportunities considered and taken to
market
[00:07:54 – 08:42] Approval by the Investment Banking Committee
[00:08:42 – ] The deep due diligence process
[00:10:21 – 11:46] Negotiating with founders and addressing critical issues
Introduction
