There’s a lot There’s a lot of confusion for businesses that are seeking capital regarding private equity vs. venture capital, and it’s easy to see why.  Both are targets for securing funding, with the goal of growing the company.   

However, there are quite a few key differences between private equity and venture capital that will affect how your business seeks funding based on its current state.

Private Equity Vs Venture Capital

Profitability: While private equity firms will want to take on a company that isn’t profitable, with the goal of restructuring and turning it around. VCs generally invest in companies that aren’t profitable.

Growth rates: Growth rates are another factor with Private Equity typically investing in companies with relatively slower growth rates of 20-50% year over year , whereas VC’s are looking for explosive growth rates of 10-20% month over month or even more.

Venture Capital Vs Private Equity

Ownership: PE firms are typically looking for majority ownership in the companies they choose to invest with so they can have total control over the business. Whereas, VCs generally take minority positions in the companies they invest in, Larger VCs usually exert control through board seats that they usually negotiate in an investment round.

Type of Businesses: The most common industry for VC investment is tech based startups with a very little to no track record.  However, these businesses that do not require a lot of capital to get off the ground. While, PE companies tend to focus on more conventional business, even real estate and large brick mortar business that usually have good track records.

So which is right for your business?

Are you willing to give up control of the business? private equity firms are looking for total control, VCs generally don’t.

Is your company a startup, or do you have a proven track record?  VCs consider investing in early stage companies, while PE companies look for more established business.

There are many other ways to fund a business outside of the Venture Capital and Private Equity. if these aren’t for you.  Here’s a few resources you may want to consider:

Here’s a list of the top 5 Private Equity Firms in the US:

Here’s a list of the Most Active Venture Capital Firms in the US:

Are you interested in securing venture capital for your business and feel like Stout Street Capital could be a great fit?  Please reach out to us here.