What does investing in companies mean?
It may well be the cornerstone of our capitalist economy: investing in companies. You allocate your capital to a business in exchange for a share of ownership, with the aim of generating a return. But how can you, as a private investor, invest in companies—and how does Marktlink Capital support you in this process? In this blog, we explain.
First, it’s important to understand that investing in companies is just one of many options. You can also invest in (commercial) real estate or residential property, and there are numerous other ways to put your capital to work—ranging from simple (leaving it in a savings account for minimal interest) to unconventional (investing in rare Pokémon cards). However, investing in companies is a unique asset class with its own characteristics, which we outline below.
Why investing in companies is attractive
Investing in companies is primarily attractive because it allows you to put your capital to work with the goal of growing it. If the company you invest in—partly thanks to your capital—grows and becomes profitable, you benefit in two ways. You share in the profits, and your ownership stake increases in value. Moreover, you invest close to the source: in the businesses that create value through their products and services.
There are also less tangible, yet important, aspects to consider. By investing in companies, you contribute to employment, innovation, and the businesses that form the backbone of the economy—and society. Nine out of ten investors at Marktlink Capital are (former) entrepreneurs who know the SME landscape inside out. That’s why they prefer to invest in what they understand: companies with potential and ambition.
How does investing in companies work?
In exchange for your capital, you receive a share of ownership in a company, often accompanied by a degree of influence over its governance. Typically, this ownership stake is referred to as a share, and all shares combined form an equity stake.
Shares and stakes come in many shapes and sizes. For example, two brothers running a family business may each own 50% of the company. A retail investor holding 100 shares in ASML, on the other hand, owns more shares numerically but holds only a tiny fraction of the company. At the time of writing, there are nearly 400 million ASML shares outstanding, making 100 shares just a small fraction of the total.
There are various mechanisms for buying and selling shares. In large companies, shares are traded on stock exchanges—open markets accessible to everyone, also known as public markets.
SMEs, however, are typically traded through M&A advisors who match buyers and sellers. These transactions may involve full ownership transfers or minority stakes. Unlike public markets, these are not open platforms—there is no central marketplace, and access to deals is restricted. These are private markets. At Marktlink Capital, when we refer to private markets, we mean the activities of private equity and venture capital funds operating in this space.
To generate returns for investors, there are generally two mechanisms. First, you can sell your stake in a company. If the value has increased during your holding period, that gain is realized upon exit. Second, as a (partial) owner, you are entitled to a share of the company’s cash flow, meaning profits can be distributed as dividends.
Within private equity and venture capital, the focus is typically on the first mechanism. As we say: “value is realized at the finish line.” When a company is sold, the fund exits the investment and returns proceeds to its investors.
It’s important to note that not only individuals can hold shares—companies and investment funds can as well. This is particularly relevant, as these are the private equity and venture capital funds that Marktlink Capital works with. These funds raise capital from institutional and private investors and invest in a portfolio of companies. At the end of the fund’s lifecycle, investments are exited and returns are distributed—this is the fundamental principle of private equity and venture capital.
How does Marktlink Capital help you invest in companies?
Marktlink Capital connects private investors with companies in two ways.
First, we provide access to investment funds that acquire and manage stakes in companies. This is done through fund-of-funds (diversified portfolios of multiple funds) and feeder funds, which allow direct investment into leading private equity funds. As an investor, you commit a certain amount for the duration of the fund—typically around 10 years. These funds then invest in companies, putting your capital to work in high-potential businesses.
Additionally, Marktlink Capital regularly acts as a co-investor. In this case, we invest directly—via one of our funds—in a company, usually in the form of a minority stake. In this blog, we explain in more detail how this works and highlight examples of attractive co-investment opportunities.
Investing via public markets
It’s useful to highlight the contrast between investing in companies through public markets and private markets. Investing via the stock exchange is straightforward. Many investors use their bank or invest independently, as buying and selling shares can be done at the click of a button on platforms like BUX and DEGIRO.
With the rise of ETFs (exchange-traded funds) and index trackers, there are many ready-made solutions for diversified public market investing. Liquidity is also high—shares can typically be sold quickly. This means your capital is not locked in, unlike with private market investments.
However, public markets also have downsides. They can be highly volatile and sensitive to political developments and irrational market bubbles, as seen during the dot-com crash and the 2008 financial crisis.
Another key limitation is that only a small fraction of companies are publicly listed. In the Netherlands, there are tens of thousands of companies, but only just over a hundred are listed on the Amsterdam exchange. These are typically mature companies that have already completed much of their growth journey. By investing in private markets at an earlier stage, investors can benefit from the high-growth phase companies experience on their path to maturity.
In short: public market investments are more liquid, but also more volatile and concentrated in a relatively small segment of the market.
What should you consider when investing in companies?
As with any investment, it’s essential to strike the right balance between risk and return. Diversification is key—avoid putting all your capital into a single investment. Liquidity—how quickly you can buy or sell investments and how long your capital is tied up—is another critical factor.
Marktlink Capital’s products address the diversification challenge by enabling investment across a broad selection of private companies. It is also advisable to consult financial and legal advisors to determine how private market investments fit within your overall financial planning.
Curious about the opportunities? Get in touch with our team.
This is a promotional communication for the funds of Marktlink Capital. Marktlink Capital holds a license under Article 2:65 of the Dutch Financial Supervision Act (Wft) and is registered with the AFM.
Bonus: What investing in companies is not
Investing is different from speculating. In everyday language, speculation is often confused with investing—especially in cases like “investing in Bitcoin.” Speculation involves buying an asset purely to sell it at a profit in the short term, without considering its underlying value or long-term developments.
While speculation with company shares is certainly possible, it is not the focus of this article—and in private markets, where investment horizons typically span several years, speculation plays a much smaller role.
You can also provide capital to companies in the form of a loan. In public markets, this is done via bonds; in private markets, via private debt. The key difference is that loans do not grant ownership in the company.
This has its advantages—you typically receive your capital back according to a fixed schedule, plus interest—but also disadvantages, as you do not participate in potential profits or value appreciation.
