The goal of a venture capital investment is a very high return for the venture capital firm, usually in the form of an acquisition of the startup or an IPO. Venture capital is financing that’s invested in startups and small businesses that are usually high risk, but also have the potential for exponential growth. Let’s take a closer look at how venture capital and private equity work, before diving into some of the reasons why we might confuse the two. Venture capital, on the other hand, goes in for a portion of the company, usually splitting the startup pie with other VCs, angels, the founders, and any other investors that have taken on equity investment in the startup’s lifetime. Private equity, on the other hand, is interested in companies that have already established themselves, but need more capital in order to thrive.Īnother big difference? Private equity firms typically purchase at least a majority share of a company, if not 100 percent. Venture capital tends to go for early stage, higher risk companies with potential for “hockey stick” growth, which is when a company goes from nothing to everything, super fast. The biggest differences, traditionally, between VC and private equity are the stage of the company they invest in and the type of growth they’re looking for. What’s the difference between venture capital and private equity? That’s the case with private equity and venture capital. And sometimes those different options can overlap - or at least seem to. There are a lot of options when it comes to startup funding.
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