InsightsResourcesPrivate Equity vs. Venture Capital

Private Equity vs. Venture Capital

Private equity (PE) and venture capital (VC) are both forms of investment that involve injecting capital into businesses, however there are a number of key differences as outlined below:

Stage of Investment:

  •         VC focuses on early-stage companies, typically startups that are in the early phases of development.
  •         PE targets mature companies that are usually beyond the startup phase and are looking for capital to fund growth.

Company Size:

  •         VC investments are generally made in smaller companies with high-growth potential.
  •         PE investments are made in larger, more established companies with a proven track record.

Risk & Return:

  •         VC investments carry higher risk but also offer the potential for significant returns if the company becomes successful and experiences substantial growth.
  •         PE investments carry less risk and whilst returns may be more modest are still highly attractive.

Time Horizon:

  •         VC investments often have a longer time horizon (10-12 years) before they mature and provide returns due to the early stage of the companies and the time required for them to achieve significant growth.

·         PE firms generally have a shorter time horizon (5-7 years).

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