When looking at how to invest in private companies the first step is to understand the definition.
A private company is defined by its stage in development.
Entrepreneurs beginning a business usually receives some investment from a friend or family member on very favorable terms.
This first stage is often called angel investing At this stage the company would be known as an angel firm. After the initial start up next in line is venture capital. Venture capital is where a group investors get involved to add both growth capital and managerial know-how or other operational assistance. Our other article goes into more depth about the tax breaks for Venture Caps.
When venture capital gets involved this is when a firm is seen to have at least some long-term potential.
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