What is Private Equity &Venture Capital
Funds investing private equity or venture capital are offering medium and long-term capital to companies that are not publicly traded with the objective to support them to grow and achieve success on the market. In general, the medium to long-term investments are done for a period of 3 to 7 years. Within Western Europe, private equity investments are done mainly by institutional investors like pension funds and insurance companies.
Obtaining private equity or venture capital is very different from getting a loan or credit from a bank, for example. A bank would usually ask for guarantees and the company is under pressure to pay regular instalments of interests and principal regardless of whether they are successful or not. Private equity and venture capital are provided to the company in exchange for a share in such company. The investors become co-owners of the companies and the return of their investment depends on the growth and profitability of the company.
Funds that provide private equity or venture capital are helping the companies through advisory services and active participation in their management. It is not just about providing financial resources, but also a certain know-how for the management and development of the company.
Venture capital represents a specific type of investment focused on start-ups. The objective is to support new entrepreneurs with unique ideas who need the funds and often also the knowledge and experience necessary for future development and growth of their business.