The Role of Private Equity in Starting a Business.

This market is for the trading of company stocks and derivatives by public thus generating money. An investor of equity capital is like shareholder in the company. He is like a partner to the SME. No compulsion of amount refund invested in share by the investor. Not any compulsion to pay interest on equity like it is done in debt market. If a company earns profit then the investor earns profit too. It is the most effective way to raise capital. Since the owner has no worry to earn profit to give interest like debt market. It encourages the entrepreneurship and innovation in a positive and big way.
There are two important body of private equity. Those are:
Venture capital
Venture capital consists of funds, equity or conditional loan in order to promote unlisted, high-risk or high-tech firms or small business, driven by technically or professionally qualified persons. Such funds are so blind that one can‟t expect the return. The investors invest money via a channel.
Angel Investors
Angel finances are those types of finance where investors are generally family members or friends. They may provide money at the time of start-up or in between for the growth of the firm. They are direct investment.
Angel and venture capitalists invest their money very intelligently and selectively but without stepping into a controlling or operating role. They don‟t invest blindly to any small businesses or firms. They use to choose only those firms which have higher potential growth and having scope in future.

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Deepesh Singh
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