has spent his career in business investment and he is currently working as a fund manager for the private equity company TitleCard Capital. Tyler has been an investor too and this is why he has amassed such a breadth of information about business investments. One of the most common questions which we receive here in terms of investment is about private equity which is why we thought that Tyler would be the perfect one to answer those burning questions which you may have about this investment vehicle. Let’s take a look then at a breakdown of what private equity is.
In a Nutshell
Basically private equity is the investment in an already established business, in return for a stake in the company and a seat on the board of directors. These businesses seek investment for a number of reasons, mainly so that they can either seek growth and expansion, or to save them after some rough years.
These established businesses could easily seek investment through a lending source such as a bank or a private lender, and they could also bring income capital through the selling of shares. The reason many businesses prefer to go down the private equity route is that they also want the expertise and knowledge of the investor. Private equity funds like TPG Capital and the Blackstone Group have people with rich experience in business who are able to impact opportunities and help the business to reach its goals.
This is Like Venture Capital?
Venture capital is not the same as private equity, both are investment vehicles but there are some key differences in terms of how they operate, when they invest and most importantly, who they invest in. Venture capital is the term which is used to refer to an investment in a company which is just getting started. These young businesses carry more risk and require more work for the investor than with private equity.
What Are They Hoping To Achieve?
The goal for a private equity company is very simple, they look to get in and inject cash in a business, help to improve it and reach its goals, and then sell their share for a higher price than they paid for it. This is a plan which helps the fund but also one which helps the business as the investor will leave the company in a better shape than which they found it.
These funds invest money from high-wealth individuals but the majority of their capital comes from pension funds and private savings accounts. These low risk accounts provide the perfect chance for fund managers to secure the large volume of cash which they need to invest in a business. The profits which are made are then shared out amongst these funds and to the private investors who put their own cash in.
Private equity explained in less than 5 minutes, any more questions you have don’t hesitate to ask.