Purpose
Give readers a clear, practical framework for evaluating private deals across angel investing, venture capital, private equity, and private credit.
This teaches judgment — the core skill of private markets.
Core Principle
Private Deal Evaluation = Team Quality × Market Potential × Product Strength × Financial Reality × Terms**
Every private deal ultimately reduces to these drivers.
If one is weak, the whole deal weakens.
1. Team Quality
Private markets are dominated by outliers — founders and operators who bend reality.
A strong team demonstrates:
If the team is weak, nothing else matters.
2. Market Size & Dynamics
Markets determine the ceiling.
Evaluate:
TAM (total addressable market)
growth rate
competitive intensity
pricing power in the industry
barriers to entry
structural tailwinds or headwinds
Large, expanding markets forgive mistakes.
Small markets magnify them.
3. Product & Differentiation
The product must either be:
10x better
faster
cheaper
easier
more delightful
more reliable
more integrated
Ask:
What problem does this product solve?
Why is it meaningfully better than alternatives?
What prevents competitors from copying it?
Moats often begin here.
4. Traction & Metrics
Even early-stage companies must show signs of real momentum.
Look for:
early revenue
user growth
retention
unit economics
pipeline consistency
customer testimonials
repeat purchase behavior
Traction reduces uncertainty.
5. Financial Model
A credible financial plan must explain:
how the business makes money
gross margins
operating leverage
cash burn and runway
capital requirements
expected path to profitability
long-term margin structure
Great companies eventually generate cash.
6. Terms & Structure
Terms determine your actual return — not just company success.
Understand:
liquidation preferences
pro-rata rights
ownership dilution
board control
voting rights
redemption rights
debt covenants
downside protection
A great company with bad terms = a bad investment.
The Private Deal Equation
Expected Return = (Team × Product × Market × Traction) ÷ Price + Terms
Strong fundamentals + fair valuation + investor-friendly terms → attractive opportunity.
Weak fundamentals + high valuation + aggressive terms → avoid.
What This Explains
This lesson clarifies:
why “great founders in big markets” dominate returns
why most private money is lost through bad terms or weak teams
why due diligence is more about judgment than spreadsheets
why professional investors obsess over downside protection
why early-stage investing is about asymmetry, not certainty
This is the private-market skillset most people never learn — and the one that creates the largest fortunes.
