Money talks, but not as loudly as it used to.

As private equity funds continue to exceed fundraising goals, private markets have become increasingly liquid in the decade following the financial crisis. A larger supply of uninvested money is forcing investors to become more creative and dynamic to compete. Merely having money to invest is not enough to gain access to the best ideas, innovators, and businesses.

Today, financing partners have to bring something else to the table. The private market financiers who are having the most success are those who formulate a focus on a specific niche. Sometimes, that niche is an investing focus on underserved markets or complex financing situations. Other times, a niche is simply a deeper focus on a specialized industry, such as healthcare or technology.

Specializing in a niche market allows investors to:

  1. Refine their investing strategy with applicable experience to avoid missteps
  2. Use valuable connections with industry contacts to recruit top talent
  3. Market their firm more effectively to a pool of sellers who have  plenty of options to choose from

Many investors bemoan the increased competition for good deals as they have to work harder and be more creative to make a buck. Certainly, the private market’s flush cash position has not changed everything for the better. However, it seems like this trend toward a more value-added investment approach is here to stay; at the end of the day, that is a very positive development for business in the U.S.