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How to invest in a private company?

Investing in publicly listed companies is straight forward. You open a trading account and start buying stocks of a specific company to invest in it. On the other hand, investing in a private company is not so smooth. The average number of public companies in most countries can be around 1000 - 5000, whereas the number of private companies is generally in millions. This brings several challenges to the table.

1. Discovery - It is hard to find which private companies you would like to invest in. In fact, it is very difficult to obtain a list of all private companies in any country. The SME business is heavily unorganized.
2. Due Diligence - Most of the private businesses do not have best accounting practices which make it difficult to perform good due diligence of the same.
3. Liquidity - Once you have invested in a company, it is difficult to exit from that investment.

Platforms like SMERGERS help handle some of these issues. It connects investors with interested companies. One can visit this link to review companies that are seeking financial investors - The process would involve connecting with shortlisted businesses, discussing with the business owner, issuing a non-binding LoI, due diligence, followed by Binding Letter of Intent and SPA (Stock Purchase Agreement) signing.

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