7 questions before any private deal pitched to doctors
Every physician gets pitched private deals. Here are 7 questions to ask before you say yes.
The best one is the first: how much of their own money is the sponsor putting in?
Slide by slide
- 7 questions to ask before you invest in a private deal
- How much of their own money is the sponsor putting in? If they won't go all-in, ask why.
- Who gets paid if it fails? Walk through the waterfall: lenders first, then fees, then you.
- How does the sponsor get paid: fees, a share of profits, or both? Fees get paid even if you lose.
- What's the most I can make, and the most I can lose? Watch for capped upside with full downside.
- Can I see audited numbers? Public companies file with the SEC. Private deals don't have to.
- How do I get my money out, and when? Assume you can't, until you're shown otherwise.
- What happens if the sponsor's best case doesn't happen? Ask for the bad-case plan, not the pitch-deck case.
Sources
- From Capital Rounds episode 000 on private deals: Who gets paid when a private deal fails? and Why isn't the sponsor all-in?
- Public companies' filings are free to read on SEC EDGAR.