Invest in Private Equity: Getting Started

What’s in this section:

 

 

How can I get access to Private Equity?

InvestX Financial gives qualified retail investors access to investments private equity; and more specifically, brand-name, late-stage private equity deals.  

InvestX specifically provides access to private growth equity. Private growth equity is a type of PE that focuses on late-stage, rapidly growing companies that have gone through the business risk curve.

InvestX selects private companies for investment that meet our "InvestX 3-Factor Formula" - a minimum of $1 billion valuation, a 30-50% growth rate, and evidence of a liquidity event (i.e., an IPO or trade sale/acquisition) within 12-36 months. Unless a company meets this criteria, it will not be available for investment through the InvestX platform.

 

Do I have to be a certain type of investor?

You must be an accredited investor and provide documentation proving your accredited investor status, such as two years' worth of tax returns or a brokerage statement.

 

What is the definition of an accredited investor?

It is an investor that meets one of the following criteria:

  • An individual who, alone or together with a spouse, owns financial assets worth more than $1 million before taxes but net of related liabilities
  • An individual, who alone or together with a spouse, has net assets of at least $5,000,000.
  • An individual whose net income before taxes exceeded $200,000 in both of the last two years and who expects to maintain at least the same level of income this year;
  • An individual whose net income before taxes, combined with that of a spouse, exceeded $300,000 in both of the last two years and who expects to maintain at least the same level of income this year
  • An individual who currently is, or once was, a registrant with a registered adviser or dealer, other than a limited market dealer

 

Below are other examples of accredited investors:

  • Financial institutions
  • Governments and governmental agencies
  • Insurance companies
  • Pension funds
  • Registered charities
  • Certain mutual funds, pooled funds and managed accounts
  • Companies with net assets of at least $5 million
  • Persons or companies recognized by the OSC as an accredited investor

 

What’s the minimum investment?

The minimum investment size to invest in a private company through InvestX is $20,000.

 

What fees are involved with private equity investing?



Carried interest ("carry") fee - PE fund managers typically receive 15-20% of the profits. It is also known as a "performance fee" because it is the fee that the manager makes for enhancing the company's performance. It’s important to note that the manager only receives the performance fee once they have returned all of the contributed capital to the investors or limited partners (LPs).

Management fee - PE fund managers typically receive a small management fee, which is around 1-2%. This fee covers the cost of managing and investing in the private company.

 

How do I get my money back?

 

Private equity investments are meant to be longer-term investments and the investor is often rewarded with a substantial return for their patience.

There is no set length of time for every private equity investment. Each investment has it’s own "lock up," or term, which is the length of the investment. With private equity, the term is usually between 1-10 years.

At InvestX, we provide access to late-stage private companies with exit potential within 12-36 months, either through an IPO event or a acquisition/trade sale. It is important to note that after an IPO, there is typically a 6-month underwriter lockup period, meaning that investors must wait for 6 months after an IPO before they can sell their shares. 

 

What documents do I need to sign?

 

An investor must complete and sign a confidentiality agreement and subscription documents.

 

How am I protected?

 

As an investor in a private equity limited partnership (called the limited partner) you are afforded certain protections through the limited partnership agreement and the subscription agreement.