Name: Daniel Gorback
Company: Wilson Sonsini Goodrich & Rosati, PC
What is the ideal objective of private equity in the American economy?
The ideal objective of private equity is to facilitate the meeting of ideas and capital. Certain individuals and entities such as university endowments are sitting on large amounts of capital and would like to invest those funds in developing or underperforming companies but are not capable of evaluating the universe of opportunities. Likewise, developing or underperforming companies believe investments could improve their situations but are not capable of going to every single capital rich individual or entity. PE plays this matchmaking role by pooling funds from various sources and researching opportunities to invest those funds.
How is private equity designed to meet that objective?
PE firms create funds in which wealthy individuals and institutions can invest their dormant funds. They then evaluate companies which apply to them or are referred to them.
Please give examples of both how it has lived up to and failed to meet that objective.
Google, Facebook, Dunkin' Donuts on the company side, and the many individuals and institutions who have profited from these investments are examples of the benefits of a healthy private equity market. Of course sometimes PE firms fail their investors by investing in a company that fails, or fail developing companies by missing the opportunity to invest in what could have been a great company.
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