The basic objective
A private equity firm raises a large pool of money, uses it to buy whole companies (not shares of public ones, and not small slices of early-stage startups), works to make each one more valuable over a period of years, then sells it. The company it buys is called a portfolio company, and the years it owns it are the holding period, typically three to seven years, not indefinitely.
Buying companies vs. investing in startups
This is a different bet from venture capital. A VC fund buys a small stake in a startup, expects most of those bets to fail, and needs one or two to become huge. A PE firm buys the whole company, usually one that's already profitable and boring in a good way, and expects nearly every deal to work, just to varying degrees. Nobody is betting on a 99%-failure rate at PE.
Buy → improve → sell → generate a return.
That one line is the mental model for the entire course. Every lesson from here on is really just asking "which part of that sentence are we looking at right now?"
| Ownership | Typical check size | Holding period | Expected win rate | |
|---|---|---|---|---|
| Private equity | Whole company | £50m-£500m+ | 3-7 years | Nearly every deal expected to work |
| Venture capital | Minority stake, 10-30% | £1m-£20m | 7-10 years | 1-2 in 10 expected to succeed |
| Public equity | Shares, often <1% | Any size | Days to indefinite | Diversified, no single-company dependency |
Checkpoint
- Private equity: buying whole companies, improving them, and selling them for more than was paid, within a fixed holding period.
- Portfolio company: a company a PE firm currently owns.
- Holding period: the years between buying and selling, usually 3-7.
- Buy → improve → sell: the mental model underneath every lesson in this course.
If anything here still feels unclear, ask before moving to Lesson 2.