Every investor dreams of discovering the next Meta, Uber, or Amazon, but they also know that it's much easier said than done.
With just over 1300 unicorns globally, finding one and attaining this level of ROI requires considerable research, a deep understanding of key market segments and relevant players, and a bit of luck. Dealmakers must recognize the potential of early-stage companies and proactively build relationships with them, all while under the pressure of beating their competition to the punch.
Getting an edge over other successful private equity and venture capital firms means understanding how to identify and connect with prime investment-ready targets faster, earlier, and more effectively. In this guide, you'll gain an insider view of M&A to augment your knowledge of how to research private companies by taking it one step further. Let's dive into how to find annual revenue for a private company, ways to discover how much a company is worth, and more.
While a quick Google search can tell you a lot about a public company, finding operational and revenue information about private companies is a different story. In the US, private companies are not required to report or disclose financial or any other operational information to the Securities and Exchange Commission (SEC) or to the public.
So, even large private companies (such as Cargill, with an estimated $177 billion in revenue) have no obligation to disclose financial or operational data.
Valuation is an incredibly important part of making a deal. But before we dive into the how, it's important to understand the two types of private companies:
To find out how much a company is worth, your methods will likely change depending on the type of company. For instance, investor-backed private companies will usually announce funding rounds and customer wins that can give firms an idea of their size, growth, and revenue. From there, you can try to get a general idea of how much that company is worth with the founding round amount, stage, and valuation multiples of other similar-sized companies in the same industry.
But bootstrapped private companies often hold their numbers much closer to the vest. What's more, the earlier a company's stage, the more likely you should factor technology, executive experience, key milestones, the competitive landscape, and other types of information into the company valuation. In fact, more firms are beginning to develop proprietary models and projections that use data like this to determine bootstrapped company growth trajectory and investment readiness without readily available revenue data.
Without a clear view or source of funding or revenue, dealmakers can do a bit of extra research and manually calculate a rough estimate of a company's sales figures. Take Prodigy Snacks, for example, who took one of our spots on a Best of Bootstrapped for the food & beverage industry.
Like many other companies, they tout specific numbers on their website that are directly derived from how many products they've sold. While their products range in price and don't include tax, shipping, discounts, wholesale pricing, etc., a starter pack of 13 bars costs around $20. That gives a very rough estimate of $20 million in sales over the course of their business.
This is napkin math, of course, and should be taken with a rather large grain of salt. But with relatively little information to go off for many private companies, using information on products sold or their number of customers can give you a leg up on determining a company's sales figures.
However, not all companies post this type of information about themselves. And even those that do may have changed prices, products, and other key value indicators along the way. So, how can you find private company data and determine the revenue of these investment opportunities?
In the past, dealmakers had no choice but to manually piece together information from across different data sources in an attempt to create a cohesive, multi-dimensional picture of target private companies. Unfortunately, this process doesn't take minutes or hours — it takes days and weeks. And all too often, the end result is still laden with inaccuracies and outdated information that causes firms to lose deals.
Today there are deal sourcing platforms that use a combination of advanced technology, artificial intelligence (AI), and human quality control to capture, validate, and connect millions of data points across online and offline sources. The result is a web of insight that not only delivers verified, high quality company details, but also offers the context necessary to better understand entire industries and derive deeper, less obvious data signals about these companies’ growth intent.
In addition to basic company profile information like industry, year founded, and location, there are several private company data signals that can help dealmakers “read between the lines” and accurately gauge the viability of private investment targets. These data signals can be bucketed into 9 distinct categories:
For example, knowing if and when a private company has increased its number of employees, received industry recognition, and attended key conferences helps answer many important revenue-related questions, such as:
Leading deal sourcing platforms will use these signals and inferences to provide revenue estimates for private companies. Data- and tech-savvy firms can also learn how to find the annual revenue for a private company by using these signals to develop proprietary scoring models based on their own investment theses and discoveries.
Ultimately, the secret to getting a distinct edge in delivering benchmark-beating ROI comes down to where you look for data, what data you look for, and the tools you choose to discover and assess it all. Get started sourcing more profitable private companies with Sourcescrub's deal sourcing platform today by requesting a demo!