Key differences between venture capital and private equity

While both private equity and venture capital refer to firms that invest in companies and exit by selling the said investments in equity financing, there are major differences between these two funding types.

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Venture capital firms mostly invest in small businesses and startups that show promise for high-growth. On the other hand, private equity ones mainly focus on acquiring mature, established companies that have deteriorated and are not making profits anymore. The idea is to streamline operations to get them back on the right track and increase revenues.

Private equity firms often buy 100 percent ownership of the companies in which they invest, giving them total control after the buyout. Venture capital firms invest in 50 percent or less of the equity of the companies. This is because most venture capital firms prefer to spread out their risk and invest in various companies.

Private equity firms acquire companies from any industry, while venture capital firms are often limited to startups in the sectors of technology, biotechnology, and clean technology. Private equity firms use both cash and debt in their investments, but venture capital firms deal only with equity.

Private equity firms mostly concentrating their efforts in a single company, investing $100 million and up. Venture capitalists spend $10 million or less in various startups with unpredictable chances of failure or success.

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Gregory Lindae is a go-to expert in venture capital and private equity markets. He has also worked with some of the most prestigious financial companies in the industry such as BlackRock, Salomon Brothers, and FMO. For more on his work, drop by this page.

Waking up some tigers: Is Asia the new frontier for private equity?

Investors are looking east, where spending power is rising, global brands are relocating, and labor is relatively affordable. The Asia-Pacific region is luring alternative investments, specifically, private equity, in an environment of willing consumption.

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Fund managers and investment groups took note of the upswing in profits last year in Asia. Certain industries, such as education, wines and spirits, and cultural goods have shown themselves ripe for picking. Meanwhile, retail is slightly nipping at investor confidence in Asian countries known for business inefficiencies.

So-called “frontier territories” such as Vietnam, Myanmar, and other emerging markets are also attracting funds, albeit with some modernizing exigencies. There are notable cases of underperforming businesses and companies that have been turned around by the infusion of private equity. Sectors that have most benefited from the boom are media, technology, and telecom. Asia-grown stellar technology startups such as Alibaba, Baidu, and Grab are also galvanizing interest in the region.

Meanwhile, the strongest evidence for the region’s attractiveness to private equity is the entry of four of the largest private equity funds in the global market. These Asian funds from elite financial institutions in China, Japan, and Singapore have a target size of at least $100 billion.

Given these realities, Asia has displaced Europe as a haven for private equity investment, although investment experts warn that such growth might be cyclical, as has been observed in the past.

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Gregory Lindae is an expert in venture capital and private equity markets. He has also worked with some of the most prestigious financial companies in the industry such as BlackRock, Salomon Brothers, and FMO. For more reads on the investment industry, visit this blog.

Private Equity and Venture Capital: What’s the difference?

The common source of confusion between a private equity and venture capital is that they both refer to firms that invest in companies and exit by eventually selling their investments via equity financing. But all the funding similarity ends in this general, canopy aspect.

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These two business endeavors invest varying amounts of money, claim different percentages of equity, and deal with different sets of companies, distinguished by type and size. Venture capital firms mostly put their money in startups with high-growth potential.

Most venture capital firms spend $10 million or less in companies and would spread out their investments among various startups. This way, if one fails, the entire capital is not affected. Unlike private equities, venture capitalists deal only with equity, investing only in 50% or less of these.

Private equity firms, on the other hand, use both cash and debt in their investment, and mainly get involved in established, mature companies that are not earning. While private equities can buy companies from any sector or industry, they prefer to focus on a single company, buy 100% ownership, and work on the operations to make it grow anew and generate revenue.

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A go-to expert in the investment industry, Gregory Lindae has built an impressive track record and influence in venture capital and private equity markets. He has worked with prestigious companies like BlackRock, Salomon Brothers, and FMO. For more on his work, drop by this website.

The Advantages Of Private Equity Investment

Private equity is an alternative investment instrument that gained popularity in the 1980s, when the private equity sub-industry leveraged buyouts entered public awareness due to numerous high-profile transactions. Since then, individuals and institutions realized that private equity is a profitable investment option.

There are numerous reasons for investing in private equity assets, such as the following:

 

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Diversified portfolio

Most financial advisors recommend diversifying portfolio, as it can minimize risks, maximize returns, and protect the portfolio from volatility. Private equity, when researched and analyzed intently, can balance the portfolio.

Plenty of opportunities

Of the millions of companies all over the world, less than one percent of them are listed on public exchanges. Instead of restricting investment activities on the limited number of public companies, investors can gain access to a large collection of potential investments by selecting private equity.

Participation in companies

Stockholders in public companies typically play take passive roles in management. It is different in private equity investments. Most of the time, private equity managers, who have extensive experience in the industry, want to actively participate in some of the management and operations tasks of the companies they invest in.

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Long-term outlook

For those looking to gain quick profits, private equity is not the right option, because investments in this asset class experience returns after a few years and private equity firms generally wait for the right opportunity before investing in a company.

Gregory Lindae is a veteran in the investment industry with his over two decades of experience in venture capital and private equity markets. For more investment insights, subscribe to this blog .