Private Equity & Venture Capital

Private Equity & Venture Capital

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Private Equity & Venture Capital

Private Equity

Private Equity firms buy an already existing company and restructure it to develop further, expand and make it better than before. The companies may be deteriorating or not making the profits they should be due to inefficiency. Private equity firms buy these companies and streamline operations to increase revenues.  The investments are made at the maturity level of the company, having a substantial operating history. The package may include both equity and debt financing.

Venture Capital

Venture Capital is described as the capital contributed by the investors or individuals to startup business which are having a fresh concept and promising prospects.

Venture Capital firms focus on the capability of management.

Venture capital firms invest in start-ups with motive of high growth potential.

The new private company is not able to raise funds from the public, may go for venture capital.

Difference between Private Equity & Venture Capital

Basis Private Equity Venture Capital

 

Risk Involved Low risk Higher degree of risk as compared to private equity.
Investment Period Investment in growth stages. Investment in early stages i.e. startup stage.
Funding Structure It may be both Equity and Debt. It is primarily Equity.
Result Private Equity’s prefer to invest in business that are already formed and result is predictable. Venture Capital’s invest in startup business. Result is not predictable
Number of investment Private Equity firms make invest in few companies. Venture Capital firms make invest in large number of companies.

 

 


 

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