Private Equity : Lecture 1

Venture capital, leveraged buyouts (LBOs), and distressed debt are all types of investments included in private equity (PE).

The main focus of private equity (PE) is on leveraged buyouts (LBOs), where companies are acquired using significant debt financing.

General Partners (GPs) in a private equity (PE) fund are responsible for deciding which companies to invest in.

General Partners (GPs) are responsible for the losses incurred by the partnership.

Limited Partners (LPs) are the investors who provide funds to the partnership.

General Partners (GPs) typically own 1% of the partnership, while Limited Partners (LPs) own the remaining 99%.

Management fees are charged in a partnership to cover administrative costs such as salaries and office expenses.

Corporate VCs invest in small firms, which may or may not have a connection to a larger corporation.

Business angels are individual investors who provide funding at the early stages of a company, before venture capital (VC) investments.

Software and IT received the most Venture Capital (VC) funding in 2020. This reflects the rapid growth and innovation in the technology sector.

Intangible assets, such as intellectual property and brand value, are difficult to evaluate and resell, which is a common characteristic of VC investments.

Private equity (PE) primarily focuses on small private companies that are not publicly traded.

Leveraged buyouts (LBOs) are the main sector of private equity (PE) investments. PE funds use debt to acquire companies with the goal of improving their performance and then selling them at a profit.

Venture capital (VC) primarily finances investments in small private companies with high growth potential.

Private equity (PE) investments have experienced a consistent upward trend in the last 20 years, driven by increasing institutional investor interest and the availability of capital.

Apple, Google, Amazon, and Microsoft are examples of companies that were backed by venture capital (VC) in their early stages.

Partnerships in private equity (PE) typically last for 12-15 years, which reflects the long-term nature of PE investment.

General partners (GPs) are responsible for the day-to-day management of a private equity (PE) partnership, including making investment decisions and managing the portfolio.

General partners (GPs) are not protected by limited liabilities in a partnership. They are personally responsible for the partnership's debts and liabilities.

Limited partners (LPs) provide funds to a partnership in exchange for a share of the profits. LPs are passive investors and their liability is limited to their initial investment.

Management fees in a partnership are used to cover the costs of day-to-day operations, such as salaries, legal fees, and office expenses.

Limited Partners (LPs) have their liabilities limited to the money they invest in the partnership. They are not personally liable for the partnership's debts.

General Partners (GPs) typically receive 20% of the profits as carried interest, which is a performance-based fee that incentivizes them to generate high returns.

The hurdle rate is a minimum return threshold that must be achieved before General Partners (GPs) can receive carried interest.

Initial Public Offerings (IPOs) are considered risky and unreliable exit strategies in private equity because the IPO process is complex, unpredictable, and subject to market conditions.

The United States is considered the birthplace and a major hub of the venture capital (VC) industry, with a strong ecosystem of investors, entrepreneurs, and supporting infrastructure.

The growth of the venture capital (VC) industry in the United States was fueled by the availability of significant capital from pension funds, which sought higher returns.

Government agencies are major sources of funding for venture capital (VC) in Europe. These agencies provide capital and support policy initiatives to foster innovation and entrepreneurship.

Business angels play a vital role in the venture capital (VC) industry by investing in early-stage companies, often providing seed capital before VC funds get involved.

The primary focus of private equity (PE) investments is on diversified portfolio companies across various sectors, with the goal of generating returns through acquisitions, restructuring, or IPOs.

Limited partners (LPs) typically own 99% of the partnership, while general partners (GPs) own 1% The majority ownership reflects the role of LPs as the primary providers of capital.

Business angels are individuals who invest their own money in promising companies, typically at an early stage in their development. They provide capital and mentorship to help these companies grow.

In 1979, a rule was implemented that prohibited pension funds from investing substantial amounts of money in high-risk asset classes, including venture capital (VC). This significantly reduced the amount of capital available to the VC industry.

In the VC industry, gatekeepers are individuals or firms that play a role in connecting funds with promising investment opportunities. They help VC funds identify and evaluate potential ventures.

Software received the most VC funding in 2020, reflecting the rapid growth and innovation in the tech sector.

Intangible assets, such as intellectual property and brand value, are difficult to assess and re-sell, which is a common characteristic of VC investments. VC funds invest in companies with high growth potential, but the value of these companies can be difficult to quantify.

Corporate VCs invest in small firms, which may or may not have a connection to a larger corporation. These VCs are often associated with established companies and provide access to resources and networks.

VC plays a crucial role in company growth by providing not only funding but also strategic advice and connections to networks. Venture capitalists often become active board members, providing valuable insights and guidance.

Angel & Seed VCs typically invest at the very early stages of a company, often providing small amounts of capital to help entrepreneurs get their ideas off the ground.

General partners (GPs) in a private equity (PE) partnership are personally responsible for the losses incurred by the partnership.

Management fees in a private equity (PE) partnership are charged to cover operational expenses, such as salaries, legal fees, and administrative costs.