Investing in private equity is a way wealthy investors and private lenders can provide funds to startups and early-stage, high-risk ventures, in return for an equity stake in the business.
Here at IW Capital we believe in helping companies and investors find the right type of funding to see their investment portfolios and businesses flourish and exceed their potential.
Investing in private equity has its advantages and disadvantages. Here’s a look at what investing in private equity means to investors, and whether or not it’s the right type of investment for you.
What is private equity?
Private equity is finance provided to a company in return for an equity stake or shares in the company.
The finance typically comes from high net worth individuals and firms. They buy stakes in businesses or gain control of public companies, and look to make them private in the future.
It’s a similar type of funding to venture capital, in that finance is being exchanged for equity in the company, there are some key differences, however.
Venture capital is primarily a way for startups to raise funds to support their growth. While investing in private equity, on the other hand, often means selling off up to 100% of a company and giving over most or all control of the business to the private equity company.
Should you invest in private equity?
If you have funds available and are looking to make an investment that has the potential for high returns, you should consider investing in private equity.
You do need to be aware, however. As with most financial investments that have the potential for huge returns, there is also more risk.
From a business perspective, the private equity model has been proven to help support sustainable growth for a business. Not just through the financial gain from the private equity lenders, but also through professional expertise offered by the lenders.
It’s a way for large companies to diversify their lending portfolio and take advantage of some external expertise. There is the obvious disadvantage of giving up a percentage share in the business, but this is necessary in order to raise the financial backing you need.
If you also have some expertise to offer a business, it’s definitely something you should consider as an investor.
Advantages of investing in private equity
The main advantages of investing in private equity are:
Expertise leverage – As an investor, you have the opportunity to give your input and expertise into the company you’re investing in. This gives you some control over the direction the company is going in, helping you to protect your investment.
Equity stakes – Having an equity stake in businesses opens the door for you to see behind the scenes in growing companies and new markets. You can choose your investment based on the individual company, the market, industry, or whatever sector you’re interested in.
Portfolio diversification – As an investor, you know how important it is to create a diverse portfolio of investments. Private equity means not only diversifying the type of investments you’re making, but you can also spread it across very different industries.
Here at IW Capital, we’ve been investing in private equity for a number of years. With an executive team with more than 50 years’ collective experience and a varied portfolio of investments, we’re confident we have the skills and experience to help should you want to start or grow your private equity portfolio.
If you would like to find out more about the services we offer, contact a member of the team to find out how we can help.