Lately, it seems like all the headlines are about the “private markets” —
Private startups like SpaceX and Anthropic are about to IPO!
Oh no – private credit is having a meltdown!
Private equity is coming to your 401(k)!
But most people don’t understand what these terms mean. They don’t realize that not all “private” investments are created equal.
So today, I’ll break it down for you in plain English. Because once you understand the differences, you’ll see where the real opportunity lies.
What We Focus on (And Why It Matters)
At Crowdability, we focus on two main areas:
- Early-stage private startups.
- Pre-IPO opportunities like SpaceX, Anthropic, and Anduril.
We focus on early-stage private startups because they can deliver extraordinary returns. According to Cambridge Associates, a top financial advisor with clients including The Rockefeller Foundation and Harvard University, over 25 years, early-stage private investments have generated average annual returns of about 58%.
Historically, these investments were off-limits unless you were wealthy. Not anymore. That’s the gap we’re working to close at Crowdability.
And we focus on pre-IPO opportunities because, simply put, companies today are staying private longer. If they’re staying private longer, that means more of their growth is happening in the private markets, and more of their gains are going to private investors.
Then There’s “Private Credit”
Private credit is generating a lot of headlines right now — bad headlines.
Private credit simply means non-bank lending (where financing is provided by investors other than banks) to private companies. Generally, these are mid-size companies with relatively stable revenues.
Instead of going to a bank, these companies borrow from a private fund, or from a publicly traded BDC (Business Development Company). Some well-known BDCs include Ares Capital Corp (ARCC) and Blackstone Secured Lending Fund (BXSL).
These funds make loans that are designed to generate high current income. For many years, this worked extremely well, with investors earning annual yields of about 10%.
But recently, cracks have started to appear. You see, many of these loans were made to private software companies — the same companies that AI is threatening to disrupt.
If these companies struggle, their revenues will fall, their cash flow will tighten — and suddenly, those “safe” loans won’t look so safe anymore. It’s possible that default rates will soar.
That’s why you’re seeing so many scary headlines about private credit right now.
Now Let’s Talk About “Private Equity”
The term “Private Equity” doesn’t usually refer to startups.
Instead, it refers to an strategy used by investment firms like KKR, Apollo, or the Carlyle Group. In this world, private equity means buying an established company, improving its operations, and then aiming to sell it for a profit.
For example, these investment firms might buy a mature business, load it up with debt, cut costs, grow cash flow — and then, after five to seven years, they’ll try to sell or take the company public.
The reason Private Equity is in the news right now is that there’s a push to bring such investments to everyday investors. Specifically, President Trump wants to allow you to invest in private equity funds in your 401(k).
On the surface, that might sound exciting. But the reality is that private equity is generally designed for institutional investors, pension funds, or ultra-wealthy individuals. That’s because the fees are high, liquidity is low, and the benefits are really around diversification and solid returns (rather than spectacular returns).
This isn’t where you’ll find 10x or 100x opportunities. It’s more about the opportunity for steady returns, financial optimization, and lower but more predictable upside.
We’ll share more of our thoughts on this trend in a future article. But for now, just know that “private equity” is a far different animal than “private startups.”
What Does This Mean for You?
In summary, today we looked at:
Private Startups — This is where you can find massive upside, and where the greatest wealth is created. Private startups include early-stage companies that are just getting off the ground, as well as later-stage private companies planning to IPO. These are the areas where we focus.
Private Credit — Private credit means making loans to mid-sized companies. Because of AI disruption, there’s growing concern that these loans will increasingly come under pressure.
Private credit funds, especially the publicly-traded BDCs, have offered attractive yields in recent history. But with their loans potentially under pressure, the risk is higher now than it has been.
Private Equity — Private equity investments offer lower relative risk and moderate returns. This isn’t where outsized gains typically happen.
Historically, private equity was built for institutions. As it might land in your 401(k) before long, we’ll spend time this year explaining the pros and cons of it for investors like you.
The Bottom Line
“Private markets” is a broad term. It includes many types of opportunities.
Some private-market opportunities are designed for income. Others are designed for stable returns for large institutions.
And still others — including private startups and pre-IPO companies — are designed to offer extraordinary returns. These are the opportunities we focus on at Crowdability.
Happy investing,
Matthew Milner
Founder
Crowdability.com
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