Checklist before investing in a private company: questions to ask yourself

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.