An innovative company that wants to grow, manufacture or commercialize its innovation needs funding. In a challenging economic environment where access to bank credit is restricted, the company can consider an alternative financing solution: private equity.
Indeed, private equity funds often choose to invest in innovative companies, referred to as “targets.”, but they also get actively involved in the management and management strategy, frequently taking a majority stake in the companies, though sometimes a minority one.
In all cases, the target company benefits not only from capital but also from a network of professionals and strategic skills; these are key assets to accelerate development. In return, the company must transfer part of its capital, which means that the entrepreneur or management team is accompanied and supported in managing their company.
It’s important to keep in mind that the primary objective of private equity funds is to enhance the value of the target company and generate the best possible capital gain upon exit. This is therefore a medium-term investment, generally between 5 and 10 years. Indeed, the fund seeks, through investment and experience, to maximize value creation between its entry and exit from the target. In that case, the business owner and the private equity firm have aligned interests.
The private equity market is highly diversified, both in terms of investment strategies and number of funds. For example, French private equity funds were able to invest 26 billion euros in 2,692 companies in 2024 (of which 2,109 are located in France).
It’s also worth noting that venture capital[1], financing, a specific private equity investment strategy, has enabled companies like Uber and Airbnb to grow and become global leaders. Private equity financing can be an effective solution for target companies to grow and enter new markets.
In this essential financial process, valuation plays a crucial role: the valuation of an innovation, a product, or a target company represents a true sign of confidence for the private equity fund. It helps define the objective market value of the company at the time of sale or capital opening.
From the investment fund’s perspective, valuation represents a major decision-making tool to monitor portfolio lines and measure how financial and management strategies have enabled the fund to evolve. The other advantage of valuation is to have a very precise vision of the value of each line in the fund, anticipating the best exit strategy [2].
Finally, assessing the correct level of entry and exit valuation for the target company has a determinant role in value creation. This is why mandating a firm specializing in innovation and valuation of intangible assets, such as Brandon Valorisation, will provide both the fund and the target company with a complete and objective vision of the valuation. Furthermore, such an approach helps identify the best value creation levers to activate.
Bibliographie :
- France Invest and Grant Thornton Report “Activity of French Private Equity Players 2024,” 40th Edition, March 2025
- Alumni Ventures « Case study: Uber and Airbnb », August 2023 https://www.av.vc/blog/practicalities-of-venture-capital
[1] Venture capital (often abbreviated VC), is a financing method specifically intended for young, innovative companies needing significant funds to develop their technology and launch it on the market.
[2] Exit strategy: sale to a secondary fund, an industrial company, or a decision to go public.
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