At the very first glance, a lot of people find private equity and venture capital to be more a less the same. Both of these types of firms are known to have a lot of moment, and tend to invest in business organizations that are privately held with the aim of garnering big returns. The fund managers belonging to the TitleCard Capital, however, mention that there are certain key differences between venture capital and private equity, especially when it comes to their impact opportunities and the type of companies they invest in.
Private Equity and Venture Capital are basically types of financial assistance that is provided to firms at various stages. Owing to the similarities they share conceptually, a large number of people tend to be confused about them. The fund managers of TitleCard Capital mention that while venture capital and private equity do share a certain bit of overlap, there are prominent differences between two of them as well. Private equity usually takes into account large investments in companies that are matured. While on the other hand, in the case of venture capital relatively small-sized investments are made in firms that are just going through the initial stages of their development.
Private Equity fund typically refers to an investment vehicle that is unregistered. In this sphere, investors tend to combine their money for the purpose of making investments. While on the other hand, venture capital financing deals with providing funds for the ventures that gave high risks and are promoted by new entrepreneurs coming in the industry and require assistance from investors to give a shape to their ideas.
Here are some of the major differences between venture capital and private equity as underlined by the fund managers of TitleCard Capital:
- Private Equity Investments are generally made by the investors at the expansion or later stage, while in case of venture capital the funding is given in quite the early stages
- Private Equity firms tend to make investments in just a few number of companies. However, venture capital companies have their dealings with a number of organizations.
- Private equity funds are usually offered to companies that have a good record and are mature. However, venture capital funds are given to firms that are typically small in scale and do not have much of a reliable track record.
- Private Equity investment can easily be made in almost any sector or industry. This does not, however, happen in the case of venture capital. In venture capital, the investments are made in industries having high growth potential like information technology, biomedical and so on.
- When it comes to private equity, the funds tend to be utilized in the operational or financial restructuring of the undertaken company. But in the case of venture capital funds, the money is invested in streamlining business operations and identifying a way of launching new services or products into the market.
These were a few of the core differences between venture capital and private equity.