5 Criteria for Evaluating Private Tech Companies to Become a Shareholder

Five years into my career, I wasn't ready to work for a private startup company. It seemed too risky.

While I saw others leave Accenture and win big, I was unsure how. Eight years later, I finally took the leap.

After a grueling, Red Bull-fueled year and a failed startup, I realized I had led with my heart, not my head.

 Everything changed when I developed a due diligence process for private companies, transforming risk into opportunity.

Why This is Important

Investing your time in a private tech company is risky.

This framework helps you assess opportunities, ensuring informed decisions about where to invest your most valuable asset: your time.

Common Pitfalls for Tech Employees

• Ignoring product quality and market fit

• Overlooking customer sentiment

• Neglecting the leadership team’s experience

• Failing to scrutinize financial health

• Misjudging the timing of equity liquidity

The Reality

Startups are challenging, with most failing early. Public equity often offers more stable wealth-building opportunities.

However, with the right approach, private equity can be rewarding.

5 Criteria for Evaluating Private Tech Companies

1. Evaluate the Product and Its Buyer

• Quality: Is it high-quality and innovative?

• Personal Use: Would you personally use this product?

• Target Market: Is it aimed at consumers or businesses?

• Commercial Advantage: Does it have a predictable buying cycle?

2. Customer Sentiment

• Feedback: How do customers feel about the product?

• Loyalty: Are there raving fans advocating for it?

• Community: Is there a community of users that discuss the product and it’s use cases?

3. Leadership Team

• Experience: Do they have a background in growth, scale, and public company readiness?

• Reputation: What is their standing in the industry?

• Culture: What kind of workplace culture do they foster?

4. Financials

•  Sales Growth: Is there a steady increase in sales?

•  Burn Rate: How close is the company to profitability?

• Indicators: Use the Rule of 40 to assess financial health (Growth Rate + Profitability should equal or exceed 40).

5. Quality of Equity

• Dilution: Is the equity heavily diluted or not?

• Value Trajectory: Is the equity increasing in value?

• Liquidity: How close is the equity to being liquid?

Litmus Test

Ask yourself: If you had $300,000, would you invest in this company?

If the answer is no, then it is not worth your time. Time is your most precious asset and you need to invest it wisely.

Tune In to This Week's Podcast

Want to dive deeper into these 5 criteria and hear real-world examples of how to apply them?

Listen to this week’s podcast episode, in which we unpack each criterion in detail and share insights from industry experts.

Don’t miss out on this valuable discussion, which can help you make smarter decisions and build your wealth through private tech company equity.

Listen to the Podcast Now!

Tech Equity and Money Talk is a weekly podcast showing you how to work for tech equity as a wealth-building strategy and meet your financial goals.

 066:🎙️ Guide to Building Wealth with Equity Compensation for Private Companies

Listen in to this week’s episode where I discuss the exact framework I used to work for 3x companies that went through an IPO. 

It wasn’t luck but skill that allowed me to de-risk the scenario.

Listen Now 👇️ 

7 Mindset Shifts to Real Wealth

Today, I want to share the top lessons I have learned from observing investors run their portfolios like businesses to fuel their lifestyles and build a legacy.

These lessons can help mid-career tech executives like you strategically increase your net worth.

Each lesson is a step toward greater financial wisdom and freedom.

Lesson 1: Prioritize Assets Over Liabilities

It’s easy to get caught up in the earnings and spending cycle.

The true path to wealth involves shifting focus from short-term gains to long-term asset accumulation.

Recognize that every financial decision should enhance your asset base.

For instance, choosing real estate investments over luxury cars can significantly impact your net worth's trajectory.

I learned this lesson early in my career by watching mentors who focused on building their asset columns. Their ability to retire early and with confidence was a direct result of this strategy.

Remember, it's not just about how much you make but how much you keep and grow.

Lesson 2: Embrace Lifelong Learning About Wealth

There's a misconception that once you reach a certain level of success, the learning stops. This could not be further from the truth.

The landscape of wealth management is constantly evolving. Staying educated on financial trends and investment strategies is crucial.

Every successful financial figure I've followed has committed to continuous learning. It’s not just about understanding money; it's about mastering it.

Lesson 3: Control Your Lifestyle Expenses

Many fall into the trap of increasing their spending as their income rises. This is often short-sighted and can impede true wealth accumulation.

Real discipline involves maintaining a modest lifestyle even as your earnings increase. This prevents financial setbacks and ensures consistent wealth growth.

During my time at a rapidly growing tech company, I saw many colleagues fall into this trap, which later required significant lifestyle adjustments.

Lesson 4: Value Health Over Wealth

It’s a common mistake to prioritize wealth accumulation at the expense of health. This approach is fundamentally flawed.

Without good health, the enjoyment and use of your wealth could be severely limited. Too many professionals neglect this balance, leading to regret later in life.

My own experience taught me to maintain a rigorous health regimen, keeping me effective both professionally and personally.

Lesson 5: Understand and Heal Your Financial Relationship

Many people have an unhealthy relationship with money, whether it’s fear of losing it or overspending it.

Acknowledging and addressing these issues is crucial. Consulting a financial therapist helped me realign my attitudes and behaviors toward money, paving the way for healthier financial decisions.

Lesson 6: Network with Like-Minded Achievers

The power of a strong network cannot be overstated.

Surrounding yourself with individuals who share similar financial goals can provide support, insights, and opportunities.

Building a network of wealthy, knowledgeable individuals has opened previously unimaginable doors to me.

Lesson 7: Mentor Others

Sharing your knowledge not only helps others but reinforces your own understanding and commitment to these principles.

Teaching about wealth has allowed me to reflect on my journey and solidify my strategies.

It’s both fulfilling and beneficial.

To recap, the path to significant wealth is not just about making money; it's about making smart choices with your money. Remember:

• Build and prioritize your assets.

• Never stop learning.

• Keep your spending in check.

• Never sacrifice your health for wealth.

• Heal your relationship with money.

• Network wisely.

• Pass on your knowledge.

These lessons are the pillars of a sustainable approach to wealth.

Start implementing them today, and set yourself on the path to becoming truly wealthy!

When you are ready, there are 3 Ways I can Help You:

1.) Get started on your learning - 🎧️ Follow our Podcast

2.) Watch our Videos - 📺️ Subscribe to our Channel

2.) Build a Career or Money Strategy 🧠 Book a 1:1 coaching session

Disclaimer: This newsletter is for informational purposes only and does not constitute financial or career advice. Always consult with qualified professionals before making any decisions based on the information provided.