Private Equity, Private Placements and Venture Capital
Private equity generally refers to an asset class in companies that are not publicly traded on a stock exchange.
Private equity investments are typically made by private equity or venture capital firms or individuals called angel investors. Each of these parties comes to the table with different goals, their own ideas for investment strategies and their own personal preferences. Nonetheless, they all work for a common goal, that of expanding an existing company or a new one, new product development or restructuring a company’s ownership, operations or management.
The most common strategies employed to generate private equity are mezzanine capital, growth capital, venture capital, distressed investments and leveraged buyouts. For example, a leveraged buyout involves a private equity entity buying major control of an existing company. On the other hand, with growth capital investment or venture capital, investors put their money behind emerging, young companies. Venture investment is commonly offered to companies researching and developing new technology, new products and new marketing techniques. Typically, the products involved here are not proven.
Venture capital is usually sub-divided into categories, beginning with the initial early stages of launch to later stages that may involve growth capital. Later stage venture capital infusions allow a company expand and to starting funding their future growth/expansion.