Public vs. private sector: What’s the difference?

Everyday you interact and exchange with the public as well as private sectors. From grocery shopping to driving on the roads, you use services or products from both private and public companies. This article will help you understand the basics of each market.

What is the difference?

The private and

Public markets

Both make up the larger financial environment, but there are huge differences in the types or investors who invest in each. Private companies exist in both

Private markets

While private companies are privately traded on the stockmarket and can be invested by the general population, they are funded through institutional investors. Below we’ll explore these differences as well as provide additional resources for the financial markets.

Key characteristics of traditional asset class and public markets

In the

public markets

Companies may sell shares to the population. The public can then buy, sell, or trade these shares on a Stock Exchange. Stocks are traditional asset classes. Bonds are also considered mainstream investments. The stock market is a place where people can invest individually or through programs such as a pension plan.

Public companies are usually larger and more mature. Government organizations like the Securities Exchange Commission heavily regulate them. These companies must disclose information about how they perform in order to remain accountable to shareholders.

What are some of the key characteristics that make up the public markets?

  • Individuals may invest in the market
  • Public companies are heavily controlled
  • Performance reporting is required for public companies
  • It is easy for you to find information about them

Get more information on the public markets

Search our glossary for terms in the public market
What do capital markets look like? Find out more about capital market and how they are different from money markets >>
How does the public sector work? Understanding how public companies value their assets and which metrics are most relevant >>
Search For more information about the types and sources of data you will find on public companies, visit PitchBook >>

The main characteristics of the alternative asset classes and the private markets

Alternative asset types refers to alternative investments. These include venture capital as well private equity, real property, and hedge funds. These asset categories make up the private marketplaces.

Fast-growing companies in the private market, however, are not listed on the public stock exchange. Professional investors receive equity in return for the support and funding they require. These investors include

venture capital firms

Investing in young companies (startups) is a way for VCs to get involved.

Private equity companies

, which invests in more established businesses. This is a space that the public can’t invest in, with the possible exception of very wealthy people.

Private companies are not accountable to public shareholders. This makes them less subject to regulation. They are not required to file earnings reports or financial statements for auditing. This makes outsiders unable to get reliable and accurate information.

It’s important that investors are aware of the fact that not all private corporations can be backed. A venture capitalist will likely not back a small business owned by a family member or individual.

Private equity firm

However, the company is not publicly traded and it remains private. This is true for the majority of private companies.

What are some of the key characteristics that make up the private market?

  • This market is restricted to professional investors only (or very wealthy individuals).
  • Private companies are more relaxed about being regulated
  • Private companies do NOT have to report performance
  • It can be hard to find information about these people.

Discover more on the private marketplaces

How does venture capital work? Get information about venture capitalists.
What exactly is private equity? Understanding private equity, how PE companies invest and more >>
Hedge Fund 101: How do they Work? Discover how hedge funds function and how they are different from other funds >>
PE, vs.VC: What’s it all mean? See the difference between venture capital (VC) and private equity here

How do private businesses become public companies?

Going public is when private companies list themselves publicly on the stock exchange. In recent years, many companies have chosen to exit other routes such as direct listings and special purpose acquisition companies.

The public offering of stock by companies allows for new growth as well as capital from an entirely different group of investors. Private investors are also able to realize a return on their investment.

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