PE is basically a parasitic business, designed to suck money out of the purchased company until it collapses. You do this by borrowing a ton of money to purchase the company. Then for the privilege the company pays the buyer a special bonus that conveniently covers its costs (and often more) out of the cash it had on hand when bought. Then the buyer continues to get various payment streams, like guaranteed dividends or all sorts of other obligations, until the company collapses.
Sad to say I'm not exaggerating.
I say "basically" because there are a couple of exceptions. Dell was purchased in a special deal with the founder so that the company actually operates but the founder was enriched in the process.
VC is a branch of private equity (an almost invisible pimple on the PE business TBH) where they don't buy the whole company and hope to make money on the IPO. But it's a small business: there are numerous companies out there with an asset base larger than the entire VC industry.
PE is basically a parasitic business, designed to suck money out of the purchased company until it collapses. You do this by borrowing a ton of money to purchase the company. Then for the privilege the company pays the buyer a special bonus that conveniently covers its costs (and often more) out of the cash it had on hand when bought. Then the buyer continues to get various payment streams, like guaranteed dividends or all sorts of other obligations, until the company collapses.
Sad to say I'm not exaggerating.
I say "basically" because there are a couple of exceptions. Dell was purchased in a special deal with the founder so that the company actually operates but the founder was enriched in the process.
VC is a branch of private equity (an almost invisible pimple on the PE business TBH) where they don't buy the whole company and hope to make money on the IPO. But it's a small business: there are numerous companies out there with an asset base larger than the entire VC industry.