Looking to raise capital for your business and exploring the different avenues to fund your venture ?
Lets take a look at the differences between Venture Capital and Private Equity partnerships. Although both Venture Capital and private equity are sometimes confused as being similar, they are actually not. Both funding partnerships invest in businesses typically via equity, the practices that these two groups utilize are slightly different and you should know what that means.
What is private equity?
Private equity or “PE” typically invest in mature businesses, mainly looking for established business practices and proven business models. Typically PE firms are made up of investors who make direct investments into such companies and take back equity or some form of equity based debt instruments. Most private equity groups are looking for low risk investments and predictable cash flows. Private equity also typically makes investments on a 3-5 year time horizon. They are looking to deploy capital, and then divest in a timely manner with the goal on maximizing return. Lastly, private equity groups typically look to take majority equity positions in companies.
What is Venture Capital ?
Venture Capital firms are similarl to private equity in respect to making equity investments, but typically they invest in earlier stage companies. While private equity is looking for a defined business model which has been proven out and generating cash flow, VC’s will come in earlier and typically when the models are being developed. Typically venture capital investments are made into smaller companies which have big blue sky opportunities. VC’s are looking for companies and management teams that looking to build the next big thing, and want to knock it out of the ball park. They invest in riskier assets and weigh their investments based on risk versus reward.
Venture capital funding is ideal for new companies at their early stage of development. Simillar to private equity, VC’s typically are very active in helping build their businesses through introductions to their networks and mentorship opportunities.
Launch Capital may be able to help with your funding
Launch Capital is a Toronto based family office which provides strategic venture capital and advisory services to assist innovative companies fuel growth and drive shareholder value.
If you think your business may be a fit for us, we encourage you to connect with us to discuss further.
