What is Private Equity? In finance private equity equates to a source of long term finance which is provided in exchange for an equity stake in a company. It is also known as an asset class which consists of equity securities in operational companies which are not on the stock exchange or publicly traded.
With this said in order to source private equity we first have to thoroughly understand the concept, for instance if you are a business who wish to source private equity for funding a new project or buyout, how would you go about it?
In basic terms private equity funding comes from individuals who have private funds which they are looking to invest in an idea or company in return for an equity stake or share of the business, the best way to provide an example is the hit TV series Dragons Den.
We have all heard seen or at least heard of the Dragons Dens, the series consists of 5 Dragons (Investors) who are looking to buy into a concept, idea or business which with funding will provide the investors with a good return on their money, making them a profit.
The Dragons are all entrepreneurs which have already made their millions in various businesses over the years, with their investment also comes their knowledge, which is invaluable when trying to take a concept from idea to market place. Each Dragon will have a specialist area in which they have concentrated themselves.
Part of stepping in front of the Dragons includes having a business plan, facts and figures are all important when it comes to funding and being able to sensibly project or forecast the potential for your product in the market place is essential.
Having a fully working prototype is essential too as the dragons will not invest in something which they cannot see in working order or at least thorough design for. Impressing the Dragons consists of firstly having the concept, secondly showing that your idea has potential in the market and thirdly having put in the effort to at least try to test the market, cost of production, yearly forecasts of both gross and net profit.
At the end of the pitch the Dragons will either see the potential and make an offer (more often than not they want a bigger equity share in the product of company than the investor wishes to part with) but for example they may investment of 250,000 GBP for a 40 percent share of the company, leaving the inventor with the majority share.
This too is the same in the real business world away from the cameras of a TV show. An investor will want all the facts and figures, business forecast s and business accounts in order to make an educated decision on whether or not an investment in a company is a viable business acquisition.
So these are the basic workings behind private equity and sourcing funding in new projects, the aim is to have a good working business idea which investors will want to take an interest in, in order to make further profit for them.
Author Resource:-
Anna Stenning takes a closer look into the concept of Private Equity and how to source funding in return for an equity share of the company.
![[Valid RSS feed]](http://www.articlesinsight.com/images/icon_Rss.png "XML Feed For RSS"){kind=icon}
Category Rss Feed
Print This Article
Add To Favorites
