Spot the Difference – Private Equity and Venture Capital

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Tommy Kim provides an article that explains the differences between Private Equity (PE) and Venture Capital (VC).

Private Equity (PE) vs. Venture Capital (VC). You suddenly realize that you are being presented with two similar, yet different types of capital sources. PE and VC investment management businesses offer investors different types of return on capital using unique risk profiles in long-term illiquid assets.

Whether you are interested in this side of the business as entrepreneurs and CEOs seeking capital or as investment managers seeking to expand your investment management franchise, they are two different types of businesses. As you are shopping for capital, here are the similarities and differences between PE and VC investment management and how they add value to our private capital market landscape and the global economy.

You had been confused at one point, not realizing that PE is actually different from VC. As you have met with both PE and VC managers, you now see that the difference is becoming more clear. Both VC and PE firms work with private capital investing in companies, add value over time, and exit investments through private sale or IPOs, public offerings. The biggest differences between PE vs. VC is in investment size and level of risk taken on each investment. In addition, PE and VC are fundamentally different in the number of deals they do and the size of capital they commit to each investment. Furthermore, PE firms seek no bad deals, while VC firms expect some or many to fail and hope that few would become a unicorn, deals that would be valued over a $1 billion.

 

Key areas include:

  • Types of private equity funds
  • Private equity target and blind funds
  • Return multiples sought in PE
  • Working in PE or VC 

 

Read the full article, Private Equity vs. Venture Capital: What is a Better Fit For You?, on Linkedin.