The link between venture capital and private equity - The Smiling Heart

The link between venture capital and private equity

If you’re uncertain about the difference between venture capital and private equity, Gregory Lindae always suggests you do your research. If you’re interested in learning about how the two forms of investment are interlinked, simply continue reading to learn about the link between venture capital and private equity.

The link between venture capital and private equity:

Essentially venture capital is a sub-type of private equity. The term private equity refers to private investments made by wealthy individuals or private equity firms, which are made directly to private businesses.

The term private equity never refers to investment in a publicly listed company, which features on a publicly listed stock exchange. However, a private equity company can buy out a company which is currently publicly listed, by performing a takeover and paying out both the company’s owner and their shareholders.

What is venture capital?

Venture capital refers to a form of private equity which is provided to recently launched start-up businesses by a private equity firm or individual investors who are looking to help new businesses get up off the ground. In exchange for a minority stake of the company, which they have chosen to invest in.

Everything you need to know about venture capital:

  1. Venture capital can be provided from a variety of sources

The most common type of venture capital is provided by investment banks and financial institutions, although private equity firms and well to do individuals may also choose to provide start-up businesses with the venture capital. Which a new company may need to pay for their first shipment of goods or to purchase a brick and mortar premise such as a shop front or a spacious office space.

  1. Venture capital is often given to businesses which have experienced recent growth

Businesses who have achieved a high level of growth in the last few months will have a far easier time searching for venture capital. As smart investors look to invest in businesses which have proven that they are capable of experiencing long-term growth.

If you are looking to obtain venture capital in order to take your business to the next level, it’s well worth making sure that you can prove that your businesses statistics such as your annual revenue and numbers of employees has increased over the past year.

  1. If you’re looking for venture capital, make sure that you have a strong business plan

If you meet with potential investors, who are interested in the possibility of investing in your business, they’ll expect to be able to flip through your business plan. Examples of information which should be present in your business plan include your projected revenue for the next 12 months as well as how you plan to use the cash injection, which you’re looking for. As no investor will provide you with capital, which you’re not going to use wisely.

If you’re ever uncertain about the differences between venture capital and private equity, simply refer back to this handy guide in order to give yourself a refresher lesson about the link between venture capital investments and private equity investments!