Growth equity investment recommendation
I'm struggling through some (simple?) logic about a particular situation and could really use some help. I'm working on a pitch for a growth equity shop that typically invests Series B or C. They asked me to recommend a company that i think would be interesting to conduct more due diligence on....
I've developed a hypothesis based off sector dynamics that I believe will lead to substantial revenue growth for a company. This company is private and there's very little public info out on them. However, when looking at public comps, the nearest competitor has insanely high EV/EBIT & EV/Revenue ratios (even compared to other tech companies....).
I am going back and forth on whether or not this would make for a good target to approach and learn more about. On one hand, I think the ratio demonstrates the market agreeing it could be a high growth area, which would be attractive for the firm. On the other hand, I could see the high ratios being a deterrent from investigating further since the firm may assume they would be forced to overpay.
On a related note- do most growth investors view B2B markets as winner take all?
B2B software, I've exclusively heard that the answer is yes in the long run, but someone should verify this.
If you really think the company is a valuable asset, you need to either be able to justify a high price for whatever reason, or you need to say something kitschy like "oh well this is a sourcing shop so I'm sure we'll pre-empt the process and get it cheap".
you need to think backwards. Valuation you can pay now is a function of where you can take this. I wrote about GE interview answers a year or two back in a bit more detail here in the forum - maybe that helps. Otherwise feel free to PM
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