when an investment is publicly traded the market value of equity is readily available by looking at the company s share price and its market capitalization for private entities the market mechanism does not exist so other valuation forms must be done to estimate value 
private equity generally refers to such an evaluation of companies that are not publicly traded the accounting equation still applies where stated equity on the balance sheet is what is left over when subtracting liabilities from assets arriving at an estimate of book value privately held companies can then seek investors by selling off shares directly in private placements these private equity investors can include institutions like pension funds university endowments insurance companies or accredited individuals private equity is often sold to funds and investors that specialize in direct investments in private companies or that engage in leveraged buyouts lbos of public companies in an lbo transaction a company receives a loan from a private equity firm to fund the acquisition of a division of another company cash flows or the assets of the company being acquired usually secure the loan mezzanine debt is a private loan usually provided by a commercial bank or a mezzanine venture capital firm mezzanine transactions often involve a mix of debt and equity in a subordinated loan or warrants common stock or preferred stock private equity comes into play at different points along a company s life cycle typically a young company with no revenue or earnings can t afford to borrow so it must get capital from friends and family or individual angel investors venture capitalists enter the picture when the company has finally created its product or service and is ready to bring it to market some of the largest most successful corporations in the tech sector like google apple amazon and meta or what is referred to as gafam began with venture capital funding venture capitalists vcs provide most private equity financing in return for an early minority stake sometimes a venture capitalist will take a seat on the board of directors for its portfolio companies ensuring an active role in guiding the company venture capitalists look to hit big early on and exit investments within five to seven years an lbo is one of the most common types of private equity financing and might occur as a company matures a final type of private equity is a private investment in a public company pipe a pipe is a private investment firm s a mutual fund s or another qualified investors purchase of stock in a company at a discount to the current market value cmv per share to raise capital unlike shareholder equity private equity is not accessible to the average individual only accredited investors those with a net worth of at least 1 million can take part in private equity or venture capital partnerships 5 such endeavors might require form 4 depending on their scale 6 for investors who don t meet this marker there is the option of private equity exchange traded funds etfs home equityhome equity is roughly comparable to the value contained in homeownership the amount of equity one has in their residence represents how much of the home they own outright by subtracting from the mortgage debt owed equity on a property or home stems from payments made against a mortgage including a down payment and increases in property value home equity is often an individual s greatest source of collateral and the owner can use it to get a home equity loan which some call a second mortgage or a home equity line of credit heloc an equity takeout is taking money out of a property or borrowing money against it for example let s say sam owns a home with a mortgage on it the house has a current market value of 175 000 and the mortgage owed totals 100 000 sam has 75 000 worth of equity in the home or 175 000 asset total 100 000 liability total brand equity