ONE Sports PowerPlay Blog

Playing Offense: Building a Portfolio

Private Equity Investments: Be Aware and Be Wary!
Private equity offerings are popular sources of funding for start-up businesses that want to avoid the red tape, regulatory hurdles, financial disclosure requirements and the costs associated with public markets or more likely, are unable to meet those requirements.

They therefore look to friends, family or other investment “angels” to raise capital for their proposed venture.

While it’s possible to achieve high returns from such investments, the odds are overwhelmingly against it.

Management Is Key
No matter how great the idea, success will be based primarily on management’s ability to execute. To bring an idea from concept to success requires a high level of planning, attention to detail, focus, persistence and execution…a rare combination of talents. Causes of failure range from overconfidence and lack of experience to the tendency to underestimate costs and overestimate sales.

It will be necessary for you as an investor to have ongoing contact and interaction with management, to ensure that they remain on track and use the invested capital wisely. Are you up for that? Does your experience and background allow you to do so with confidence?

Insist on Being Given The Detailed Paperwork
If the company’s management is reputable, they’ll willingly share with you their business plan, audited financial statements, subscription agreement and shareholder agreement. They’ll also share written documentation regarding the length of the deal, the exit strategy, how you’ll be repaid, your voting rights and the rights of other shareholders (including management).

Insist on receiving this information in writing and have it reviewed by your lawyer, accountant and financial advisor before you write a cheque.

Be Aware and Be Wary
Remember, our job is to help you achieve steady, long-term growth in your portfolio, and equally important, to help you avoid the “big mistake” and the big loss. While potentially profitable and exciting, private equity ventures bring with it huge downside risk…a 97% likelihood of failure! So be aware and be wary before investing in this asset category.

The material in this document is intended for information only and not to be used as offering specific tax, legal, financial, investment, or other advice. ONE Sports + Entertainment Group in conjunction with The Pro’s ProcessTM offers this information to our clients to help them be better prepared to meet all the challenges associated with being a professional athlete in North America.