5:55 pm edt
The Kugarand Theory of Private Equity Investing
We see entrepreneurs make the same mistake again and again. They commit to an event and 1/4 to 1/3 of the
people there have an interest, that may be between 3 and 6. They think they get a big fish that can investor $500K.
They fail to do the math and just continue to rely on faith and hope and belief that they will beat the odds. Here is
the reality of private equity investing. The national average for an individual investor is $35K in a single company.
They may invest $3M over all but the most they will put at risk in a single company on average is $35K, until they know
the company can execute. So say a company is raising $1M in $25K increments/units. So they would need
to attract 40 investors to invest $25K a piece. To get 40 that actually sign a check after due diligence and navigating
all their personal destractions, the company needs to have on average 120 investors that are interested. That
120 is all at once, but over the 6 months it takes to raise the $1M, they will have to have on average 20 a month thinking
about it. To get to the 120 that are thinking about it, they will need to have 600 investors exposed to it.
That is the Kugarand Theory of Private Equity Investors... 1 x 3 x 5 . There are always exceptions, but
this is usually how it works and any company that has raised money will tell you that they probably have had to work some
number system like that, if they went back and counted it up. This is important to investors who want to know
how the rest of the money is going to be raised and important to entrepreneurs because they need to develop a true funding
strategy that integrates many methods to reach the investors.