Purpose
Give readers a simple, investor-grade framework for judging whether a private investment (angel, venture, private equity, private credit) has real potential — or if it’s a guaranteed mistake.
Private deals are opaque, illiquid, and high-risk. A disciplined evaluation process is non-negotiable.
The Core Principle
A Private Deal = Team + Market + Product + Traction + Terms
Public markets let you diversify away mistakes.
Private markets do not.
Every check is concentrated — so the evaluation must be rigorous.
1. Team Quality
The people matter more than the idea.
Ask:
Do they have founder–market fit?
Have they built or operated something meaningful before?
Are they obsessed with the problem?
Do they attract talent?
Do they execute quickly with limited resources?
A+ founders can turn a B idea into an A company.
C founders can ruin an A idea.
2. Market Size
Great teams in tiny markets hit ceilings early.
Evaluate:
Total addressable market (TAM)
Market growth rate
Customer purchasing power
Pain intensity (how badly customers need this solved)
High-upside private deals sit in markets that are:
large
growing
underserved
undergoing change
Market quality determines the ceiling.
3. Product Differentiation
You’re looking for clear, defensible differentiation, not vague vision.
Assess:
Is the product meaningfully better or cheaper?
Is there technology, IP, or process advantage?
Does it solve a painful, recurring problem?
Would switching costs make it sticky?
Is there an early moat (brand, tech, data, distribution)?
Private investing fails when investors fall in love with stories rather than actual differentiation.
4. Traction & Signals
Traction reduces uncertainty.
Look for:
Early traction is credibility.
Lack of traction is not fatal — but then the team and market must be exceptional.
5. Financial Model
Private deals require financial literacy.
Evaluate:
A business that loses money today is fine —
as long as its economics improve with scale.
6. Deal Terms
Terms often determine the real outcome — even more than performance.
Analyze:
Good founders care about alignment.
Bad founders hide bad terms behind good stories.
The Private Deal Equation
Expected Return = (Team × Market × Traction × Terms) ÷ Risk
If any critical factor is weak — the deal falls apart.
Private investing is unforgiving.
What This Teaches
Evaluating private deals requires:
judgment
pattern recognition
skepticism
financial rigor
clarity about risk
This is not a beginner path — but understanding it prepares people for later stages of wealth.
