private equity private Equity Funds generally invest in companies either startup or established that are not listed on a public exchange or they invest in public companies with the intent to make them private. There are different stages and types of private Equity investing the focus on private Equity firms, which may manage many private Equity Funds may change through time as business conditions and the availability of financing change like hedge funds private Equity Funds are typically structured in a fund structure as Partnerships in which outside investors are limited partners also known as LPS and the private Equity Firm most private Equity firms charge both a management fee and an incentive fee on a fund basis. The investors in private Equity Investments are similar to hedge funds.

Private Equity firms also provide financing for complicated and risky transactions such as lbo's and startup or growth strategy.

Typically private Equity is organized by industry focus and their targets are both mature and early stage corporations.

There are several types of private Equity Investments.

First we have lbos. These are highly levered transactions in which private Equity firms establish a buyout fund that acquires public companies or established private companies with a significant percentage of the purchase price Finance through debt, the target companies assets typically serve as collateral for the debt and the target company's cash flows are expected to be sufficient to service the debt the debt becomes part of the target company's capital structure if the buyout goes through After the buyout the target company becomes or remains a privately owned company cost reduction earnings growth and Debt Pay down are key components of lbo's private Equity firms typically hold lbo Investments for three to five years venture capital is investing in or providing financing to private companies with high growth potential. Typically, these are startup or young companies, but Venture Capital can be provided at a variety of stages.

Growth capital investment generally refers to minority Equity investments in more mature companies that are looking for Capital to expand or restructure operations. Enter new markets or finance major Acquisitions distressed Investments is buying the equity or debt of mature companies with financial difficulties.

The key here is to identify companies with a temporary cash flow problem, but a good business plan that will help the company survive and in the end flourish.

Here are some of the large PE firms by assets under management. They are generally smaller than traditional Investment Management firms like BlackRock, which alone has 7.4 trillion in assets under management. However, the range of investment opportunities make private Equity a much juicier business with much higher fees.

Venture capital is a subcategory of private Equity the company in which a venture capital firm is investing is often called the portfolio company because it will become part of the funds portfolio to make an investment in Venture capitalists needs to be convinced that the portfolio companies management team is competent and has a solid business plan with strong prospects for growth and development because these Investments are not in mature businesses with years of operational and financial performance history the complexity involved with VC involves accurately estimating company valuation based on future prospects. This estimation is more of an unknown than an lbo investing which targets mature underperforming public companies. These Investments are made either directly or via funds. The investor set is the same as the hedge fund or the private Equity Firm since these are early stage companies. Only Equity financing is used the firms or funds are organized by industry.

Geography in purpose and again, these are young fast-growing companies.

The VC stages range from inception of an idea for a company to the point when the company is about to make an IPO or initial public offering or be acquired most typically by a strategic buyer. The investment return required varies based on the company stage of development investors in early stage companies will demand higher expected returns relative to later stage investors because the earlier the stage of development the higher the risk, the ultimate returns realize depend on the portfolio company's success in transitioning from a startup to a going and growing concern. The earliest stage is the seed investing Angel Investing as it is often called is capital provided at the idea stage funds may be used to transform the idea into a business plan and assess Market potential the amount of financing at this stage is typically small and provided by individuals often friends and family rather than by VC funds.

Next we move on to the funding rounds. This is financing that generally supports product development and/or marketing efforts. This is generally the first stage at which VC funds invest and begin to lend their experience and expertise to the company management. Finally. We move on to the final stage, which is called the listed stage. And this is where the company will see public investors with which of course comes greater capital and more liquidity.