Difference in Focus: How Private Equity and Venture Capital Firms Differ
Private equity and venture capital firm both deal in investing money into private companies. However, while private equity firms often deal with mature companies, venture capitalists invest more towards newer startups that need a boost. Both however, have the end goal of turning a profit.
Spotlight on Private Equity Firms and the Most Notable Performers
Private equity firms usually put money in businesses that are having trouble due to inefficiencies with the assumption that once those are straightened out, the companies can go back to turning a profit. Private equity firms leverage funding from institutional investors and high net-worth individuals (HNWIs) through different strategies such as leveraged buyouts, venture capital, and growth capital, noted Value Walk in a July 2019 article, which listed down some of the most notable private equity firms in the world.
The Blackstone Group as of 2019 has $545 billion of assets under management. It was founded in 1985 by former Lehman Brothers executives Peter Peterson and Stephen Schwarzman with a seed capital of $400,000. Counted among some of its investments are SeaWorld, Freescale Semiconductor, Hilton Worldwide, Leica Camera, and Vivint.
The Carlyle Group said it had about $224 billion of assets under management as of Dec. 31, 2019. It was founded in 1987 and employs more than 1,775 people in 32 offices across six continents. On Jan.1, 2020, the group completed its conversion from a Delaware limited partnership named The Carlyle Group LP into a Delaware corporation named The Carlyle Group Inc.
Kohlberg Kravis Roberts was founded in 1976 by former Bear Sterns employees Jerome Kohlberg, Jr., Henry Kravis and George R. Roberts. Its assets under management was at $218.4 billion as of Dec. 31, 2019. The firm manages multiple alternative asset classes, including private equity, energy, infrastructure, real estate and credit, with strategic partners that manage hedge funds. For the year ended Dec. 31, 2019, the firm’s private equity portfolio appreciated 27%.
CVC Capital Partners is based in Luxembourg and has about US$111 billion in secured commitments since inception. It manages $75 billion of assets. It was established in 1981 as the European arm of Citicorp Venture Capital (CVC) It has invested in more than 300 companies worldwide.
Warburg Pincus was founded in 1966, and currently has over $58 billion in private equity assets under management. The firm said it has invested more than $81 billion in more than 880 companies in more than 40 countries around the world.
The Venture Capital Space: Notable Performers
Venture Capital actually gave rise to companies such as Google, Facebook, and Amazon. Venture capital firms provide funding for startups and fairly new and usually technology-focused companies that are poised for, or in the midst of, rapid growth, in return for a minority stake in the venture. Investors make money when the companies are successfully acquired or go public. They also have the option to sell their investment and exit a company or the company's management may buy them out. Among the top performers in the venture capital space are firms Accel, Sequoia Capital, and Andreessen Horowitz.
Accel, formerly known as Accel Partners, works with startups in seed, early and growth-stage investments. It was founded in 1983. Among the companies Accel participated in are Spotify, Dropbox, facebook, and slack.
Sequoia Capital was founded in 1972 and has partnered with several companies at early and every stage of growth. These companies now have a public market value of over $3.3 trillion. These companies include Airbnb, Evernote, Xoom, and WhatsApp.
Andreessen Horowitz is a private American venture capital firm, founded in 2009 by Marc Andreessen and Ben Horowitz. Some of the companies they had a hand in are Instagram, Skype, and viki. The firm has $10 billion in assets under management across multiple funds, including the $650 million Bio funds, the $350 million Crypto fund, and the Cultural Leadership Fund.