This source of investment capital works when high net worth individuals or a firm purchases shares of a private company or acquires control of a public company with the idea of making it private again. A private equity firm operates on the premise of debt, restructuring and reselling to make money.
The minimum amount of capital required for investors to join can vary significantly from a few hundred thousand to millions of dollars. Most of the private equity funds in the US are made up of institutional investors (pension funds) and firms that are funded by groups of accredited investors. In the world of small businesses and startups, private equity firms do not play much of a role, but one day, a buyout may be the ultimate goal for your startup.