Debt is rarely used – Most early stage and growth stage investments do not have significant debt burdens and financial engineering is not a key driver of returns.Private companies – Both venture capital and growth equity firms target privately-held companies that are not yet publicly-traded. While there are key differences between growth equity and venture capital, it’s worth mentioning there are many similarities as well: Similarities between growth equity and venture capital 10+ years), given the fact they invest so early in a company’s life, whereas most growth investors are more accustomed to hold their investments for a more standard 5-year period Holding period – Venture investors tend to “hold” their investments for much longer periods (e.g.Size of investment – Growth equity firms tend to invest much larger amounts of capital (and at higher valuations), while venture capital firms invest smaller amounts commensurate with the company’s earlier stage of development.Type of primary investment risk – Related to above, venture capital firms take “market” and “product” risk (will this work at all?), while growth investment firms take “management” or “execution” risk (can we scale what’s working?).Positive unit economics – Early venture stage companies have often not yet proven positive “unit economics,” while this is often a key criteria for growth stage investors as they seek to help the business scale.Customer traction or “product-market fit” – while early stage venture firms invest in companies who are still attracting their first customers, growth equity firms invest in companies that have found initial traction and are now “scaling” their customer acquisition. While there is no exact dividing line in terms of when a company’s “early venture stage” ends and its “growth stage” begins, many point to the following as key factors in telling the difference: In this way, growth equity investment tends to follow venture capital investment. While venture capital firms invest as early as possible in the company’s lifetime (usually, at or near the very beginning), growth investment rounds typically occur after several years of development once the company has proven its business models, established positive unit economics, and has a significant customer base. The major distinction between growth equity and venture capital is the stage of company development. Differences between growth equity and venture capital In this article, I’ll outline the key similarities and differences. While both growth equity and venture capital investors target growing businesses, they differ in several important respects.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |