What is the difference between Venture Capital and Private Equity
Asia Pacific Investment House (APIH) invests in and manages Venture Capital Projects. Venture Capital is a subset of Private Equity and so all Venture Capital is Private Equity, however, not all Private Equity is Venture Capital. Therefore, in order to full understand APIH's core business, we first need to understand Venture Capital.
Both Venture Capital and Private Equity are terms used to describe a type of investing into privately held companies, as opposed to investing into public companies such as those you can invest in on Nasdac or the NYSE.
New idea versus established, profitable company
Venture Capital is invested in a brand new idea, a start-up or expanding company that typically has an uncertain future. Private Equity on the other hand, is invested in a company that is established, known in its sector and generally has a positive cash flow.
Rapid, exponential growth versus solid growth for a proven concept
Venture Capital is invested in companies with rapid growth potential over the next few years. Private Equity however, is invested in an already proven concept. It's solid, has been around and financial statements for the past several years are available, though the growth may not be particularly rapid.
10x versus 2x payout
From an investor's standpoint, with Venture Capital one looks for a fair amount of growth in 3, 4 or 5 years, though this comes with a fair amount of risk and a 10x out on money in. Private Equity whereas, is only expected to bring a return of 2/3x out on money in over a few years, but with considerably less risk involved.
Equity versus Leverage
In Venture Capital, there is no steady cash flow able to support debt hence the investment is all equity. On the contrary, Private Equity is often used and invested as leverage, which means there is debt involved. Money will be borrowed from a bank or others as part of that investment.
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