Checklist before investing in a private company

Investing in private companies is not the same as buying public stocks. There is less transparency, limited liquidity and no instant exit. You are trusting a team and a business model for years ahead.

Questions to ask yourself:

1. Investment horizon

For how many years are you ready to lock up your capital?
Can you afford to lose this money entirely?

2. Understanding the business

How does the company make money?
Does it have product-market fit?
Who are the competitors and what makes the company unique?

3. Team

Do the founders have experience in this industry?
Do they have a track record of successful exits?
Do the founders keep a meaningful ownership stake — skin in the game?

4. Financial metrics

ARR and growth over the last 12 months
Burn rate and runway — how many months the company can operate without additional financing
Unit economics: CAC, LTV and LTV/CAC

5. Market

TAM/SAM/SOM — total, serviceable and obtainable addressable market
Is the market growing or shrinking?
Are there external risks: regulation, macroeconomics or technology shifts?

6. Deal terms

Valuation and equity stake
Liquidation preferences
Anti-dilution protection

7. Risks

Competition and technology risks
Dependence on key customers or suppliers
Regulatory risks

8. Exit strategy

IPO or strategic sale?
Who are the potential buyers?
Are there historical comparable exits in this niche?

Conclusion

Investing in private companies is a high-potential, high-risk strategy. Without a systematic approach, it is closer to gambling than investing. Use this checklist as a filter: if you cannot answer most of these questions, it may not be the right deal.

Action

Consult @amch_manager before making a decision.