Venture Capital and Private Equity

What is venture capital?

Investopedia defines venture capital as “a form of private equity and a type of financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential”. A good share of venture capital investments are made in early stage companies. Since investors take higher risk, these deals often involve owners giving up equity in their companies.

What is private equity?

Private equity covers investments made into companies not listed on stock exchanges. These investments are made in exchange for equity. Typically, private equity investors raise money from various sources which they then invest in promising companies. Unlike venture capital which can focus on young companies, private equity investments tend to go to more mature businesses. Apart from venture capital, other types of private equity investments are: leveraged buyout growth equity, mezzanine investing, and more.