Introduction to PE Part 5: Why We Get Private Equity Wrong

Because it’s so hard to get good data on private equity, people start taking shortcuts. And those shortcuts lead to some big mistakes.

One mistake is thinking that the big, multi-billion dollar deals you see in the news represent the whole industry. They don’t. Small and medium businesses are bought and sold every day in ways that are totally different from those giant deals.

Another mistake is thinking that “private equity” just means big investment funds. It doesn’t. There are business angels, big corporations, and even wealthy families who invest directly in companies. They usually stay under the radar, so we don’t see them in the official stats.

Now, things are changing. New laws are forcing funds to share more info. But here’s the kicker: more information means more fees. Funds have to spend a ton of money on fancy IT systems and compliance teams to keep up with the rules. And guess who pays for that? The investors.

When governments use bad data, they make bad choices. They might see a “gap” in funding for start-ups and decide to throw taxpayer money at it. But often, those government funds end up doing worse than private ones.

This book isn’t going to be a simple math guide. It’s going to look at private equity as a cycle that’s always changing. It’s about people, plans, and innovation.

Next, we’re going into Chapter 1 to see where this all started.

Next post: Chapter 1 - Private equity is older than you think