Mark Lyttleton is an angel investor, speaker and business mentor who has a wealth of experience in establishing and growing both public and private organisations across a range of industries. This article will look at public vs private investment options, identifying the key differences between them. 

Private market investing is typically a long-term commitment, potentially with a higher rate of return. Private capital investors can benefit from a variety of diversification options, with private market investments operating in a wide range of industries, geographic locations, stages of development, investment strategies, etc. 

Businesses have a variety of different channels to choose from in terms of attracting investors and raising capital. The two common options are equity and debt, each of which can be structured in different ways. 

With an equity investment, the investor receives a share in the business, earning returns as the business grows. Equity is rarely the highest priority for compensation if the business becomes insolvent, so, to compensate for this higher level of risk, equity investors generally have a higher potential return. 

Both public and private companies have a variety of different options to choose from in terms of structuring equity offerings, providing investors with a range of different voting rights and returns. You can learn more about company share structures by viewing the attached PDF. 

One of the biggest differences between public and private equity is that private equity investors may receive periodic distributions which are dependent on certain criteria such as a refinancing or sale of an asset. These distributions are usually made throughout the lifetime of the investment and can be lumpy in nature and hard to forecast the exact timing of. With public equity, it is more usual for investors to receive a dividend return that is easier to forecast both in terms of quantum and timing. You can learn more about share distributions by watching the attached video. 

Generally speaking, public equity offers a high degree of liquidity, making it a more attractive option for most types of investor. Private equity, on the other hand, is generally only open to investors accredited with a certain minimum level of net worth, given the higher volatility of outcomes and lack of liquidity. 

All companies need capital to operate their business. Offering private equity is a strategy employed by businesses to gain access to the investment needed to scale their operations. You can learn more about the channels available to entrepreneurs to secure business funding by viewing the attached infographic. 

Often, private equity deals are done with the intention of the company going public at a later date, sometimes when the value of the business reaches $1 billion – earning the company ‘unicorn’ status. Starting as a private company provides business leadership with more flexibility to manage their equity and make distributions at their discretion, as well as enabling them to avoid the complexities of certain reporting and regulatory requirements.