Private Equity Importance

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Private equity is essential to building robust private sectors that create employment, improve living standards, catch up with the trends and produce tax revenues. The importance of equity investors are ever increasing. Contrary to the popular myth that private equity firms weaken companies by stripping them off their assets and saddle them with debt, private equity firms build companies; they do not tear them down. In the last 30 years, private equity has been adding asset and value to their respective portfolio companies. A 2008 study by the Boston Consulting Group found that since the 1980’s, operational improvement as a source of value increased two-fold to more than one-third of value creation. Companies still haven’t realized the fact that private-equity is a long-term investment that takes years before the full benefits are realized. This long term focus aligns the interests of the private equity firm with the company it buys and ensures that the company has a lasting success. Starting and building a prosperous business is an ambition of many entrepreneurial minds and has for a long time been the main source of job creation. Although talent and ambition with a tinge of quality is seldom found, it’s found nevertheless. This is where a lot of private equities fail to capitalize on the entrepreneurial potential in their respective markets, they neither have the time nor the resources to waste on an idea. There is a quite a gap in the investors circle vs. the emerging SMES. The skepticism lies in both ends, the fact remains that SME’s are hesitant to ask for investment because of their approach towards investment, the idea that they are indebted to their investors. We are not discounting the fact... ... middle of paper ... ... years. Innovation is key to building and bridging the gap between venture capitalists/angel investors and potentially the next big startup. Innovation is expensive by default, however the returns are better off than your average blue chip. A $30,000 seed investment requires much more than your $30,000, it requires a precise mix of intellectual and technical resources. Seed is the first stage of venture capital financing. They are often comparatively modest, in-order to help the founders get on their feet, build their management team, develop their product, build a business plan and the likes. An environment that is regulated in the right manner will allow investors to be less skeptical and focus more on development of these ideas rather than their focus on the return on investment, which is the ideal scenario for the development of a robust economy.

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