1. What Private Markets Really Are

Purpose

Explain what “private markets” actually mean — not hype, not jargon — but the real categories of investments that occur outside public stock exchanges, who participates, and why these markets exist.

Core Principle

Private Markets = Ownership Outside the Stock Market**

When you invest in private markets, you are buying:

• ownership in companies before they’re public

• ownership in companies that never plan to go public

• claims on cash flows that are not traded daily

• investments priced by negotiation, not market screens

Private markets are less liquid, more complex, and often more lucrative — but only for people who understand the landscape.

The Major Categories of Private Markets

Private markets can be simplified into six major types:

1. Angel Investing (Earliest Stage)

Individuals invest small amounts in:

• pre-product ideas

• early founders

• prototypes

• tiny teams

Returns: extremely high variance — a few home runs drive all outcomes.
Value driver: founder quality.

2. Venture Capital (Startups & High Growth)

Funds invest in:

• early-stage companies

• technology-driven businesses

• high-upside markets

• companies with large TAM but high risk

Investors buy growth and optionality — not cash flow.

3. Private Equity (Established Companies)

Funds buy:

• proven businesses

• stable cash flow

• established customer bases

• operations they can improve

This is the “buy a business and improve it” model at scale.

4. Private Credit (Lending Instead of Owning)

Investors provide:

• loans

• structured debt

• financing to companies that need capital

Returns come from:

• interest

• fees

• collateral protection

This market has exploded since 2008 as banks pulled back.

5. Secondary Markets (Buying Existing Stakes)

Investors buy ownership from:

• founders

• early employees

• VC funds who want liquidity

• LPs selling fund interests

This market exists because private ownership lasts longer than ever.

6. Revenue-Based Financing & Alternatives

Newer models provide capital in exchange for:

• a percentage of revenue

• royalties

• specialized cash-flow agreements

Useful for businesses that don’t fit VC or PE structures.

Why Private Markets Exist

Private markets serve real economic needs:

• founders need early capital

• businesses need growth financing

• owners need exit options

• lenders need yield

• investors want uncorrelated returns

They are the engine behind entrepreneurship and middle-market growth.

What This Lesson Explains

This lesson gives readers clarity on:

• the actual categories of private investing

• the differences between ownership vs. lending

• why each type exists

• who participates in each layer

• where wealth typically accumulates

Before someone learns how to evaluate a private deal, they must understand the map — the structure of the private market itself.