The notion of a "private equity" firm doesn't have a rigorous regulatory definition. But ordinary parlance draws a distinction between two modes of doing business, both of which involve strategic financial investments in private firms. One is "venture capital," in which you take a small group of people with what you hope is a great idea and give them some money (and perhaps business strategy advice) in exchange for a share in the company. The other is "private equity," the artist formerly known as "leveraged buyouts," in which you buy an existing enterprise and restructure it so as to make it more lucrative for its owners than it previously was.
One of the striking aspects of Mitt Romney's campaign is that even though Bain Capital was overwhelmingly a private equity firm, he preferred to talk about a relatively small venture capital sideline that—among other things—helped found Staples. Similarly, the Glover Park Group PR firm just sent me an press release on behalf of the Private Equity Growth Capital Council touting what amounts to venture capital work:
The Private Equity Growth Capital Council (PEGCC) is highlighting the impact of PE investment in Ohio today with their latest campaign video featuring Cleveland, Ohio-based Hyland Software. Hyland is an innovative software company that was able to grow in the Midwest as a result of its strategic partnership with the private equity firm Thoma Bravo. You can watch the video titled “Private Equity Investment Helps Grow ‘Slice of Silicon Valley’ in Ohio” by clicking here.
That's all fine as far as it goes. But there isn't—and to the best of my knowledge never has been—political controversy over the propriety and value of venture capital. We can play semantics all day about what is and isn't private equity, but the controversial line of business is and always has been leveraged buyouts. Do leveraged buyout firms make their profits through trust-destroying breaches of faith that undermine the economy's long-term functionality, or are they necessary to maintain an economy's productivity? That's the issue people are debating. Changing the subject is a useful way to avoid confronting the undeniable reality that leveraged buyouts are bad in the short-term for workers, but it also fails to mount a case that there are important long-term benefits to making them relatively easy to undertake.