Difference between Private Equity Fund and Private Venture Capital Fund

Private equity fund is a fund engaged in private equity (non-listed company equity) investment. It mainly includes investing in the equity of non-listed companies or the non-publicly traded equity of listed companies. The pursuit is not equity income, but the profit from selling equity through equity transfer paths such as listing, management buyout and merger.

Private venture capital refers to a fund operated by a group of people with professional knowledge and experience in science and technology or finance, which specializes in investing in companies with development potential and rapid growth. Venture capital is a long-term investment with poor liquidity, and it usually takes 5- 10 years to get a significant return on investment.

The differences between private equity funds and private venture capital funds are as follows:

1, different operation teams

Private equity investment (angel, fund) is a very broad concept. Generally speaking, such funds are only concentrated in the hands of a few people in the original founder team, because the economic structure of the whole company was founded and developed by these people. Venture capital fund is operated by a group of people with professional knowledge and experience in science, technology or finance, and specializes in investing in companies with development potential and rapid growth.

2. The liquidity of investment is different.

Private equity investment funds usually invest in mature enterprises and Pro-IPO enterprises, which are only one step away from listing. Private equity investment funds invest to help these enterprises meet the listing standards, and then withdraw by selling their shares in the stock market, so the investment price of private equity investment funds is usually relatively high. Venture capital is a long-term investment with poor liquidity, and it usually takes 5- 10 years to get a significant return on investment.

3. Different risks

Venture capital funds can be withdrawn through mergers and acquisitions by large companies, selling to other private equity funds or IPO when raising funds for the second time, so the price is relatively low, the cost of private equity investment is relatively high and the cycle is relatively long. This has greatly deepened the risk of private equity investment.

4. Different scales

The starting point of venture capital funds is relatively difficult, because it is difficult to find companies with real potential that have not been discovered, and to test investors' judgment requires a professional management team. Private equity funds generally refer to funds engaged in private equity (non-listed company equity) investment. At present, there are many private equity funds in China, including Sunshine Private Equity Fund and so on. The number of private equity funds is still increasing rapidly.

Tips: The above information is for reference only.

Reply time: 2021-11-29. Please refer to the latest business changes announced by Ping An Bank in official website.