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Private Equity Importance

opinionated Essay
864 words
864 words
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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.

In this essay, the author

  • Asks if they are prepared to take on the responsibility of being the diligent entrepreneur, i.e. to run a business.
  • Asks whether you are prepared to take responsibility for your actions and report in their prescribed format.
  • Explains that private equity firms build companies and do not tear them down. private equity has been adding asset and value to their respective portfolio companies since the 1980s.
  • Opines that a long-term focus aligns the interests of the private equity firm with the company it buys and ensures lasting success.
  • Opines that funding is probably not the right thing to do if you think you can make money by yourself without any funding.
  • Describes the responsibilities of a team and explains how to motivate them, develop knowledge outside the knowledge of your business, and in turn bring this back and allow it to impact into their business.
  • Argues that investors are reserved when it comes to startups for the simple reason of whether or not they are going to make a substantial return on their investment.
  • Explains that robert wiltbank's research suggests that angel investors across the us and uk produced a gross multiple of 2.5x their investments, in the mean time of about four.
  • Explains that innovation is expensive by default, but the returns are better off than your average blue chip. a $30,000 seed investment requires a precise mix of intellectual and technical resources.
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