Private equity is a model where individual investors or firms fund capital into a company. It remains “private” because the investment is performed outside the stock market and cannot be publicly traded. These participants include a variety of models – private equity, hedge funds, private credit, and more – depending on the business need.
Sumeru Managing Partner Kyle Ryland explained during the What Can Capital Mean to a Growth Stage Company podcast episode that the private equity firm can be viewed as a more traditional leveraged buyout approach:
“What we saw were traditional private equity firms that were making investments with more of a cash flow focused mindset, optimizing the balance sheet, cost structure and utilizing financial engineering that can be important in certain types of businesses.”
For the founder, private equity becomes a viable source of immediate capital. By providing capital, it can provide financial and emotional relief. The support gives the company quick access to substantial capital for shareholder liquidity and to a lesser degree the company.
Ryland suggests that some trusted private equity firms perform well, but they play a more financially focused role often suited for mature companies with moderate growth prospects.
Most private equity investors do not bring a set of tools to help founder entrepreneurs grow and scale their businesses, unlike a growth capital opportunity.
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