Thread by @rlnarayanan

#private_equity & #VC the big money, big #profits / big #losses

There exists a significant distinction between "Private Equity" (PE) and "Venture Capital" (VC), which can be explained as follows.
Most individuals are familiar with investing in the "public market" such as stocks

However, "private markets" are involved in investing in a company that is not publicly listed, such as "venture capital" (VC) or "private equity" (PE).
#VentureCapital
There are five stages involved in VC to PE investing, which are as follows:

#Angel (pre-VC): Angel investors provide early-stage support to startup-level companies before institutional investors are ready to invest. These companies may have an idea but have not validated it properly yet or built it into a business. Funding mostly from friends & family.

#Seed (VC): These companies have somewhat validated their product or service with customers or research, and the funds are typically used for product development and business expansion, with the hiring of the first full-time sales & marketing personnel

Growth (VC/PE):

companies have identified a need for their product or service in the market but may still be unprofitable. Fundraising is mainly for expansion, both for the team and their business.

Crossover (PE): Investors at this stage are looking for companies with

sustainable business models and profitability, and the funds may be used for expansion into new international markets or the development of multiple products or services.

Late stage/buyout (PE): Investors focus on making mature companies more efficient, increasing their value,

then "flipping" them for a greater return. The company is typically close to an exit, either by listing on a stock exchange or getting "bought out." Investment size can range from millions to billions of dollars, depending on the company.

Private equity and venture capital differ significantly in their investment objectives and target companies. As Howard Marks, the co-founder of Oaktree Capital Management, once said, "Venture capitalists are betting on the jockey, and private equity is betting on the horse."

According to EY report on PE, is PE rewriting what value means following were the findings
Source : EY report
PE/VC investments in 2021 $69.8 billion ( a record year with 96% growth due to covid)
2022 ~ 54.2 Billion

Despite this decline, 2022 marks the second-best year

PE & VC are both players in the game of finance, the game stands different. PE firms typically focus on buying established businesses & improving their operations to generate ROI while VC take more risks by investing in early-stage companies with the potential for high growth.