What PE Can Learn From Online Dating ZURICH, April 9, 2013 – A few years ago society viewed people who used online dating sites to find a spouse or fiancé as desperate cases. Today online dating is accepted, its benefits are understood, and it is a lot more common to hear someone say which dating site they used to meet their new partners. There’s a similar stigma for pioneering companies and startups using online platform and crowdfunding platforms for funding opportunities. It’s a wrong impression. As more financing opportunities move to the Internet, it is becoming more common to establish contacts and relationships online, and some companies purposely choose crowdfunding sources over traditional private equity and venture capital channels. But it goes without saying that just as in our private lives it is true with professional funding sites, the motto "Look before you leap for the long term". Online platforms help to find investors and investments, but also to structure the entire investment process better, to compare offers more easily, and enable access to necessary information, such as required for due diligence ‐ all at significantly more attractive costs and transparent pricing mechanisms. These important breakthroughs in transparency and costs are enabled by online platforms such as DealMarket, Angel List, Preqin, axial markets and. Changing macroeconomic conditions and market developments will accelerate the trend. The banking crisis, as well as the Euro‐zone problem, has resulted in volatile and uncertain markets. The ongoing economic recession and low interest rates are driving a new range of investors to private equity. Increasingly, institutional investors, investment funds and family offices are seeking to invest in private equity. At the same time, the investment universe of private equity has become much more global. The growing wealth of emerging economies means there are private equity investors looking for opportunities in the old world, while European and American investors are increasingly investing in private company in the emerging markets and in Asia. The result is that investors and capital seekers are often operating in geographically remote regions, under different regulatory, legal, and cultural frameworks, which means that an even more precise and thorough examination of business opportunities before making an investment is required by private equity market participants. Another challenge in recent years is that returns on private equity investments have fallen from their traditional higher return rates. All of these factors increase the requirements for an in‐depth due diligence and professional assessment of the risks. For small and medium‐sized organization access to capital, as well as access to the kind of information that is required for due diligence, and monitoring of deal flow (portfolio management) is often more difficult than for larger private equity funds. And yet, smaller funds as well as other smaller private equity players are measured on the same scale as large funds. This particularly applies to the expectations regarding the internal rate of return (IRR). In order to make their investment decisions with a high degree of professionalism and to minimize the risk of loss, it is therefore particularly important for small and medium‐sized private equity players to make use of efficiency‐enhancing tool and to exploit cost‐effective ways of obtaining information.
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