What’s the difference between venture capital funds and buyout/growth funds?
Venture capital firms are very close relatives of private equity investment partnerships. In one sense, their business models are the same, but their focus varies. Venture funds invest capital in start-up and young companies with little or no track record. Buyout/growth funds focus on another segment of the business cycle: They invest capital in more mature businesses that are underperforming or that have the potential to “outperform” with sufficient capital and/or operational improvements. They seek to own and operate these businesses, typically for about five years, creating value by improving operations, governance, capital structure and the strategic direction of the companies in which they invest. More recently, the distinction between venture capital and buyout funds has been blurring. VC funds have been investing more heavily in companies at later stages of development, while private equity firms have been investing in companies that more closely resemble start-ups. In the end,
