Private Equity Funding Sources

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Private equity is an important piece of the American economy, a stream of funding that serves as fuel for businesses both large and small. It is defined as money invested in a non-publicly traded company, and is an important way for these businesses to strengthen their operations, acquire new companies or fund new research or technologies.

There are a number of sources for this private equity. Some of the largest funders are institutions known as private equity firms. These institutions traditionally invest in businesses and operations at all ends of the spectrum, from start-ups to established firms. Their investments are more often on a long-term basis, ranging anywhere from five to seven years and sometimes even longer. Though there are firms for a variety of different businesses, with some specializing in areas like technology or business services, private equity firms generally look for the same traits. They want a viable business, one with a solid and proven track record of growth and success. For start-ups or businesses still in the first few years of operation, a promising business plan is needed.

Individuals can also be sources of private equity. Venture capitalists control money in a professionally managed fund, using that to invest in businesses. This type of funding is used largely for start-ups, and financial experts say it is one of the most popular funding sources for technology companies.

Other individuals, sometimes referred to as “angel investors”, also invest private equity in businesses. These people are actually one type of venture capitalist, except instead of spending money from a pool they use their own. personal funds This source of funding is more common for smaller businesses or those needing less money to get going. If a firm needs only a few hundred thousand dollars, it might not be worth the investment for a larger venture capital firm, as they likely won’t see a high enough return from that business. But because there are angel investors of all sizes, the business has a better chance finding an angel investor who is a good fit.