What are private equity firms?
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*Equity* is ownership, or partial ownership, in this case of a company. A share of stock is a form of equity, for example: it represents partial ownership of the company that issued that stock. If equity in a company is traded publicly on a stock market, we say that that is a *public company*.
Private equity, then, is equity in a company that is *not* public. Such companies have fewer restrictions on how they can operate and are often smaller or more speculative (though not always, mature private companies do exist). Because trading a private company’s shares is more difficult because of the lack of an open market, private equity investments tend to be for larger dollar amounts and intended to be held for a long period of time (years, typically).
One common example of private equity is venture capital, where investors buy part of a young and speculative business in the hopes that it will grow rapidly; most startups are funded by venture capital.
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