POWER OF A STRONG COMPETITIVE CAPITAL ANALYSIS: It defines the Opportunity
Institutional Capital Providers have many investment alternatives and even those who consider themselves “bottoms-up” investors will consider an investment framework which considers portfolio construction when they make an investment decision.
Essentially, portfolio construction is a competitive analysis framework. A Capital Provider will ask themselves “How does this opportunity fit into my portfolio and is this the “best” opportunity for my portfolio?”
The answer to “best” can only happen within the context of a portfolio’s goals and objectives compared with all available opportunities. Therefore, it is imperative to understand and be able to articulate how/why an opportunity is the “best” within the context of a competitive position.
| Strong Competitive Analysis => Funding Opportunities |
Building a competitive analysis is essentially a Peer Analysis. There are two relevant Peer Analyses for building a strong capital competitive analysis.
The Financial Peer Analysis provides a quantitative comparison, focusing on metrics like revenue, EBITDA, IRR, and MOIC. This analysis provides Capital Providers with the tools to assess the financial performance of an opportunity relative to its peers.
The Strategic Peer Analysis offers a qualitative perspective, and it helps to provide the Capital Provider with a peer comparison of the strategic aspects of a financial narrative. The Capital Provider should gain a strategic understanding of why this opportunity is the “best” opportunity for their portfolio construction goals after analyzing it.
| Strategic Peer Analysis Sample Metrics | Description |
| Strengths | Identify and compare important strategic strengths with competitors |
| Weaknesses | Identify and compare important strategic weaknesses with competitors |
| Market Conditions | Identify and compare important market conditions with competitors |
| Processes or Workflow | Identify important processes or workflow with competitors |
If you would like to discuss this further – Contact us! Or, if you or one of your clients is thinking about or has a capital opportunity – we advise on creating successful outcomes.
