It should be noted that even though venture capital firms are also "private equity," there is a distinction. Generally, venture capital is for start-ups and early stage financing. They help companies get off the ground. In the life cycle of a company, they invest at or near the beginning.
There are two other broad classifications of "private equity" also - "growth capital" and "buyouts."
"Growth capital" is used for companies that have grown beyond early stage financing and are still in a fairly robust stage but need capital to expand. "Buyouts" are generally for more mature and often larger companies. The companies are often slower growing but throw off a lot of cash and are often purchased with debt. When people criticize Bain for their business practices, they mean "buyouts," though "private equity" is often used interchangeably with "buyouts."
Some have made the argument that private equity (buyout) firms always or usually buy declining firms. That is not really correct. Private equity instead usually buys companies that are laggards in their industries and/or through off a lot of cash and don't have a lot of debt on their balance sheets. For example, one of the biggest buyouts has been Hilton Hotels which is a strong brand and not in decline but the buyer - Blackstone - thought they could make more profitable by making operations more efficient while using debt to finance the transaction.
There are two other broad classifications of "private equity" also - "growth capital" and "buyouts."
"Growth capital" is used for companies that have grown beyond early stage financing and are still in a fairly robust stage but need capital to expand. "Buyouts" are generally for more mature and often larger companies. The companies are often slower growing but throw off a lot of cash and are often purchased with debt. When people criticize Bain for their business practices, they mean "buyouts," though "private equity" is often used interchangeably with "buyouts."
Some have made the argument that private equity (buyout) firms always or usually buy declining firms. That is not really correct. Private equity instead usually buys companies that are laggards in their industries and/or through off a lot of cash and don't have a lot of debt on their balance sheets. For example, one of the biggest buyouts has been Hilton Hotels which is a strong brand and not in decline but the buyer - Blackstone - thought they could make more profitable by making operations more efficient while using debt to finance the transaction.