What is the difference between a private equity firm and a venture capital firm?

Private equity is a broader term that is used to define financial assets like unicorn private equity, shares of established private companies, and other such investment tools that are not listed in the public domain. To give you more clarity on this topic and to help you distinguish between the two terms better, not all private equities are a form of venture capital equities but all venture capital equities are definitely a form of private equities.

To help show you the similarity, here are 3 features of a good private equity investment that are also applicable to venture capital equities but not vice versa necessarily -

1) Their management is highly skilled

Leadership is one of the most important aspects to assess when evaluating the growth potential of a startup. New companies that become successful are led by visionaries who are highly skilled managers and possess a sound technical knowledge of their respective industries. The most important skill you need to look at when evaluating the startup’s management team is their ability to make swift business decisions that are correct the majority of the time.

2) They have captured a huge piece of the market

Only a newly started company that reaches the valuation of a billion dollars is called a unicorn startup. Consequently, each of these companies has a fair share of the market captured, however, the most profitable unicorn private equity investment is the one that not only has the most market captured but is even preparing to continue the growth without sacrificing the speed. Notable unicorn startups are often the ones whose products or services are easily noticed in the market.

3) They have a competitive advantage that is efficiently secured

If you just do what everybody else is doing, you will just be like everybody else. Startups that have a huge growth potential know this and as a result, try their best to execute a new idea, set a new trend, and gain a competitive advantage over their industry peers. However, this is not enough as there are a lot of copycat companies present in the market today and one needs to secure their company’s advantage with a patent or so in an effort to keep it authentic.

I hope this answer helps you successfully distinguish between private equity firms and venture capital firms.

Please read the original post here:  What is the difference between a private equity firm and a venture capital firm?


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