Definition
Private Equity investment is a popular way to put money into companies that aren't publicly traded. Funds are used to buy shares and then increase their value over time, before selling them for a greater price. This form of investment is usually managed by private entities or investors, rather than public companies.
In the room
How the word shows up in a real conversation.
Jane has an impressive track record and the private equity firm is confident that she possesses all the necessary skills and experience to take a mid-sized company with high growth potential to new heights. They strongly believe in her capabilities when it comes to building a successful e-commerce business.
Jane and the private equity firm have united to join forces on Jane's new venture. The private equity firm will supply capital and consulting for the business, in exchange for a sizable ownership portion of the company.
In the upcoming years, Jane and her private equity firm unitedly worked to develop an e-commerce business. They allocated funds towards marketing, product creation and employing highly capable personnel. This resulted in a very rapid growth for the company, transforming it into a leading name in its sector.
Ultimately, Jane and the private equity firm reap a remarkable return from the sale of the company at a lucrative gain.
In this scenario, Jane has sought the help of a private equity firm to finance and scale her e-commerce business. This partnership provides access to capital as well as expert knowledge, which is essential for developing a successful venture.
Common mistake
Using Private Equity as a label instead of a fact. If you cannot point to the evidence — a number, a customer, or a written assumption — you are using the word as jargon.
See also
Post-Money Valuation
Company's valuation after receiving investment funding, including the new capital in the total value.
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Pre-money valuation
Company's valuation before receiving investment funding, used to determine the price per share for investors.
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SAFE
A YC-style agreement to invest now and receive equity later, usually at a priced round.
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Seed Capital
Initial funding provided to start a new business venture.
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