Backing the right horse with good odds can prove profitable for gamblers, and while different (so they’d have you believe), investing in tech companies can be similarly rewarding, but with bigger stakes and on a much grander scale.

Private equity (PE) firms manage investments on behalf of others, usually institutional investors and high net-worth individuals. They provide funding to acquire companies outright or take a controlling stake, often bring in their own people to help steer the direction of the acquisition, and then make a substantial income from charging their acquired company a management fee. Unlike venture capitalists, the PE firms aren’t looking at foal-like startups, they’re looking for an established horse that has already felt the turf beneath its feet and the wind in its mane. And unlike tech firms, they’re not usually looking at an acquisition to take a company out of the market and away from competitors. PE firms will typically look to dispose of their acquisitions after three to five years, either through an initial public offering or listing, or offloading to another investor, who will be hoping to use their expertise to grow the acquired company further. If an entity is listed, the PE firm often retains a small shareholding.