Private equity investments are made in companies that do not wish or are unable to raise finance on the stock exchange. These companies may nevertheless be listed on a stock exchange. Depending on the company’s stage of development, private equity capital can be used for three purposes:
- Starting capital for start-ups: venture capital
- To finance rapid growth: growth capital
- For corporate acquisitions: leveraged buyout
The level of risk for investors varies depending on what their capital is used for.