A new series which documents some of the more painful lessons I've learned over a decade or so spent in private equity.
Lesson 1: Avoid investments that include an Exiting Founder
For my firm, without exception, these have been disasters. Let's face it, the wily old bugger who has built a business over thirty plus years knows exactly when to sell. The situation is particularly dangerous in a small business, where the processes, customer relationships and commercial judgment tend to sit in the founder's head.
I'll still consider investments with a transition plan that allows a founder to exit over a period of time, particularly if the deal includes some form of earn-out or retained equity stake.