Capitalizing a business usually involves a combination of the owner's personal cash infusion, borrowed funds and investments by outside parties in exchange for an ownership percentage, known as equity. Public corporations can raise equity investments by selling stock to the public on a stock exchange. Companies that are not organized as public corporations must raise money from private sources.
Private capital is money provided to a business as a loan or equity investment that does not come from an institutional source, such as a bank or government entity, or from the public through selling stock on a stock exchange. The money comes from private individuals or a group of individuals who make investments that are not regulated by the government or the rules of a public exchange. A private capital investment typically happens as a one-on-one transaction between the business and the investor. A company can seek private capital at any time in its life cycle, from seed funding at startup to venture capital as it grows.