What is Private Equity Fundraising?

Written by FISH

March 1, 2023

Private equity fundraising has increased in recent years as more and more people are seeking to invest. When it comes to investing, private equity is a form of capital that allows the investor to become a part-owner of a company. Private equity is often contrasted with public equity where the investor does not have any say in the business’ direction and they only receive returns on their investment. 

Private equity is a form of capital that requires the investor to purchase shares or stocks of a company. It can be compared with public equities where an investor purchases shares from a publicly traded company. When it comes to private equity, the investor owns a share of the company’s stock but is able to influence important business decisions. Investing involves purchasing preferred stocks which are usually issued with warrants that allow the holder to purchase additional shares in exchange for cash or other compensation. 

Private equity investors are able to take advantage of the ability to make decisions regarding important business aspects. They are also given enough time and resources in order to assess the possible future profitability of a company. This is due to private equity’s long-term investment periods which can range from 5 years up to 20 years. In addition to this, private equity investors are able to work with management in order to restructure the company and overcome problems that may have arisen. 

Private equity is often confused with other forms of investment because it has a similar purpose as venture capital. Venture capitalists invest a lot of money into an idea in hopes that the company becomes successful and generates a significant amount of return on capital. However, venture capitalists invest in private companies whereas private equity investors work with public companies. Investors are typically considered to be high net worth individuals since they have enough money available for this type of investment. It is not uncommon for an individual to have in excess of $10 million in order to invest in private equity. 

There are many different forms of private equity including buyout, venture capital, growth capital and mezzanine funds. Each form has its own investment period which can range from 5 years up to 20 years. The investment period for private equity is typically longer than other types of investment.

There are two different styles of investing in private equity, direct and indirect. Direct investors are able to work directly with the company’s management staff but this requires a lot more time since there are many details that must be reviewed. Indirect investors are able to invest in a fund which is managed by professional money managers. The investor does not have to spend time working with the companies since all of the investment decisions are made by the professionals at their firm. 

Private equity investing requires a lot of research before making your final decision on where to invest. The reason being is that the investment period for private equity is so long and it can take years before you see a positive return on your initial investment. Choosing a good company to invest in for this type of capital involves many different aspects such as industry analysis, cash flow analysis, business model analysis and competitive analysis.


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