Recognize the Risks of Private Equity

Understanding the implications of liquidity preferences in term sheets is crucial when engaging with private equity. While these firms have generated substantial wealth and numerous billionaires, they are not infallible. Their investment success rate is based on a strategy that often sees a significant number of failures; private equity firms typically aim for a grand slam from about five to six investments, with a majority expected to yield mediocre or poor returns. Venture capital faces even steeper challenges, often succeeding with only one out of twenty investments. This highlights the importance of thorough consultation with advisors and accountants to grasp the risks involved in private equity investments.