Both private equity and venture Capitalist
invest in companies, both recruit former
bankers, and they both make money from
investments rather than advisory fees. But if
you take a closer look at them, you'll see that
they're significantly different.
Private equity vs Venture capital -
Private Equity Venture Capital
PE firms buy companies across all
Venture Capital are focused on
technology, bio-tech, and clean-tech.
It is seen that the PE firms almost
always buy 100% of a company in
Venture Capital only acquires a
minority stake which is usually less
PE firms make large investments.
($100 Million to $10 billion)
VC generally makes smaller
investments which are often below
$10 million for early stage
PE firms use a combination of
equity and debt.
VCs firms use only equity (Cash)
PE firms buy mature, public
VCs invest mostly in early-stage
• 20% returns is what is targeted by most venture capitals and
Private equity funds. But what is generally seen is that they
are able to generate returns upto 10%.
• The difference here is that in venture capitals the returns are
mostly dependent on top firms. They believe in investing in one
big winner and making money out of it.
• But in Private Equity one can earn great returns without
investing in the largest and most well-known companies also.
Private Equity interviews can have a complete a case study
or modeling test. This is because they want to test you since
you are going to spend so much time doing analytical
and financial modeling work.
Venture Capital interviews are more qualitative and fit-
focused, especially for early-stage firms. Since Venture
Capitals work with companies that are smaller hence
detailed financial models don't make sense here. And that's
why they focus on relationships instead.
You will almost always make more money in PE than in VC. the reason for
the same is that there's more money involved and fund sizes are much
However if you want to may big money in Venture capital, all you have to
do is to find a company to invest which can turn out to be the next Google.
But this usually is very rare.
If you have a previous Investment Banking experience then, base salaries
in both industries are around $100K with widely variable bonuses.
• The work atmosphere and the culture in Private equity is very
similar to Investment banking and attracts some of the more
extreme and merciless bankers.
• The culture in venture capital tends to be more relaxed. Also
because people come from more varied backgrounds.
• People in PE more often come from pure finance backgrounds,
whereas those in VC tend to be technologists turned financiers.
• Overall the work hours in higher PE firms tends to be longer as
compared to the VC where the approach is a "normal" workweek.
• So, private equity vs venture capital, what are you up for?
• Your inclination towards one of them depends on your
goal. If you're trying to make the money in the shortest
amount of time possible or you like to work in transaction
deals, Private equity is a better option.
• If you're more interested in starting your own company
one day and you prefer relationships for analysis, Venture
Capital is better.
Which One Should You Choose?
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