In the world of finance, private equity is a relatively new industry whereby private companies finance other businesses through direct investment, often in exchange for equity in the company and in some cases, decision-making capabilities.
Private equity companies generally use capital of the principals or of high net worth investors to strategically invest in growing companies that need growth capital or seed capital to expand operations.
The terms attached to the capital infusions vary across private equity companies, but can range from taking equity in the company to warrants to having a seat on the board.
Among other support work, private equity firms can help with financial management, upgrading accounting and IT systems, and establishing new sales practices.
What is a Private Placement?
What Should I Know about Private Placements?
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Investing in a private placement opportunity is done off-exchange, and usually involves a small number of investors