heikegani@research
~/risk-management
$ python risk-analysis.py --comprehensive --mitigations
RISK FACTORS & MITIGATIONS
🌊 MARKET TIMING RISK
Risk: IPO windows remain "closed" longer than expected due to macro conditions, interest rates, or market volatility. Private companies may delay IPO plans indefinitely.
Probability: Medium-High (40-60%)
Mitigations:
• Diversify across multiple IPO timeline scenarios (2026-2028)
• Focus on companies with strong fundamentals that can survive extended private periods
• Maintain liquidity for opportunistic secondary market purchases during down cycles
• Build relationships that enable information advantage on IPO timing shifts
• Consider companies with strategic acquisition optionality as alternative exits
💰 VALUATION RISK
Risk: Private market valuations significantly exceed public market multiples at IPO, leading to flat or negative returns despite successful company performance.
Probability: Medium (30-50%)
Mitigations:
• Focus on companies with clear path to revenue/profitability growth justifying valuations
• Target investments at 20-30% discount to last private round when possible
• Emphasize companies with strong competitive moats and defensible market positions
• Model conservative IPO scenarios in investment analysis
• Prefer companies with institutional investor validation and multiple funding rounds
🔄 EXECUTION RISK
Risk: Target companies choose strategic acquisitions over IPOs, pursue alternative funding (debt/revenue-based), or experience operational challenges affecting public readiness.
Probability: Medium (25-40%)
Mitigations:
• Maintain regular dialogue with company management on exit preferences
• Monitor competitive dynamics that might trigger strategic acquisition interest
• Focus on companies with IPO-appropriate scale ($100M+ ARR) and governance
• Build portfolio diversification across 15-20 targets to absorb individual failures
• Establish positions that benefit from strategic acquisitions as well as IPOs
🎯 COMPETITION RISK
Risk: Intense competition for pre-IPO allocations from other institutional investors, private equity firms, and strategic investors driving up prices and reducing access.
Probability: High (60-80%)
Mitigations:
• Leverage fund manager relationships for preferential access and information
• Move quickly on opportunities with strong conviction and relationship backing
• Offer operational value-add beyond capital to differentiate from pure financial investors
• Build reputation as reliable pre-IPO investor through successful early investments
• Consider smaller allocations in more companies rather than concentrated bets
💪 PORTFOLIO CONSTRUCTION STRATEGY
Approach: Diversified portfolio construction with risk management built into allocation strategy.
Allocation Framework:
• 40% in Tier 1 opportunities (direct fund manager relationships)
• 35% in Tier 2 opportunities (co-investor network access)
• 20% in dark horse candidates (higher risk/higher reward)
• 5% reserve for opportunistic late-stage additions
Success Metrics:
• Target 60% success rate on IPO exits within 24-36 months
• 3-5x MOIC on successful exits
• 1.5-2x overall portfolio return accounting for failures
• Maximum 5% single position concentration risk