As an entrepreneur looking to start a new business in South Africa, you have probably heard the term private equity or private equity firm and wondered what it is, or whether it can help you launch your new business. Simply put a private equity firms are companies in which third party individuals invest their money into and the private equity firm in turn invests that money into other business, typically to either own that entire business or a share of it.

Private equity firms come in a range of different sizes and typically the largest of these firms will only be looking to invest a lot of money into the largest of business such as high street chains looking for funding. However entrepreneurs in South Africa looking for investment for their business start-ups may find that the smaller private equity firms may be interested in smaller investments although it can be a long time consuming process and difficult to find a private equity firm that will invest.

Whilst private equity firms may offer some entrepreneurs a solution to funding their business start-ups, others may prefer to deal with individuals instead. Therefore private investors, also known as Angel Investors may be the perfect solution. Whilst in many ways a private investor may operate in a similar way to a private equity company, there are some advantages with using a private investor. For example, some private investors are happy to have a more hands on approach and can provide valuable industry experience to a new business. Whilst some business owners may not appreciate this and think of it as meddling, other entrepreneurs welcome all the advice and help that they can get. Private investors are also in the position to act faster than a private equity firm, which can help a business start-up, get underway quicker, especially important if the business has time critical products or services.

For entrepreneurs looking to start a new business in South Africa, then it is important for them to explore all the options for business finance, from investing their own personal money, to private equity firms and private investors. By weighing up the pros and cons of each entrepreneurs can then and only then decide which method is right for them and their new business.