Types of Private Equity Funds
Generally, private equity funds use one of two methods of investing: venture capital and buyout, or leveraged buyout. Venture capital funds look for startups that need capital but don’t want to assume lots of debt. Since these companies initially have little value, funds are betting on the quality of the companies’ talent and ideas.
Buyout or leveraged buyout firms invest in established businesses and may take controlling stake of the organization or buy it outright. Private equity funds that pursue leveraged buyouts may take on considerable debt to gain control of these companies. They also may take an active role in restructuring and managing the company to bring it back to profitability. Generally, buyout funds tend to be larger than venture capital funds.
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