With all the turbulence in the public markets, private markets look even more attractive to investors. The private markets are 4x the size of public markets. Investors are and will continue to look for investment opportunities and right now, there is a lot of private capital to go around when we see these numbers.
A Staggering Amount of Private Capital
The private capital available in the world today is staggering. A recent report by Bain & Company found that there is more than $5 trillion of uninvested funds currently available from private equity firms, and this number is only expected to grow in the coming years. With this influx of cash, private equity firms can engage in mega-deals and drive up valuations in the process.
The increased availability of private capital is not just limited to traditional private equity firms. Family offices, sovereign wealth funds, and pension funds play a more prominent role in the private equity space and have experienced sweeping changes in 2021. With all this capital available, it’s no wonder that the private market is growing. While some people may be concerned about a potential bubble, it’s important to remember that the private equity industry is still relatively small compared to other asset classes. So even though there may be some risk of over-inflated valuations, the private equity industry still has much room to grow
Accessing Private Capital
We are witnessing record-breaking investment levels reaching billions of dollars. Several reasons for this influx of cash include:
- Low-interest rates
- An improving global economy
- A renewed focus on private equity and venture capital
The wealth of private capital available today is staggering and growing. The options for accessing this capital are many and diverse, so there’s no one-size-fits-all solution for each private company looking to raise capital. However, some general guidelines will help you find the right resources for your business. You must understand what stage your company is in. This will help you identify the right kind of capital, as well as the right source of that capital. There are generally four stages of funding for a business:
- Pre-seed Stage: This is when you have an idea but no product or service to sell. You will need to raise funds to develop your concept and bring it to market.
- Seed Stage: This is when you have a product or service but no sales. You will need funds to finance your product development, marketing, and initial sales efforts.
- Early Stage: This is when you have initial sales but are not yet profitable. You will need funds to finance your growth and expand your business.
- Late Stage: This is when you are profitable and looking to scale your business. You will need funds to finance your expansion plans.
There are many private capital sources, including family and friends, angel investors, venture capitalists, accredited investors, nonaccredited investors, and private equity firms. Each has its strengths and weaknesses, so it’s essential to understand the differences before approaching them for funding.
Additionally, we are even beginning to see a growing player in this market: JOBS Act exceptions. These exemptions, Regulation A+, Regulation CF, and Regulation D, are game-changer for companies and investors alike. These exemptions allow companies to raise significant capital from accredited and nonaccredited investors alike, which continues to widen the pool of potential investors.
The private capital market is booming, with record-breaking investment levels reaching billions of dollars. There are several reasons for this influx of cash, including an improving global economy, low-interest rates, and a renewed focus on private equity and venture capital. Not to mention, the JOBS Act has introduced new sources of capital outside of the traditional VC and private equity round. The everyday investor is showing significant interest in the ability to get in on the ground floor with a promising company to grow their wealth. With so much private capital available, it is time to take advantage of it.