Private equity and venture capital are different types of investment.

Here are the key differences:

Risk level

Private equity takes less risk and thus a lower potential return than venture capital.

Private equity investments invest in firms with a positive profit line while venture capital investments run negative on the bottom line putting everything into top-line growth.

Control level

Private equity often takes a controlling position in the company.

Venture capital takes only an oversight position in most investments.

Stage of business

Private equity invests in mature companies with a history of revenue and profits.

Venture capital invests in early-stage companies with great promise.

Funding source

Private equity raises funding from institutional investors.

Venture capital raises funding from limited partners who are typically high-networth individuals.

Size of investment

Private equity often invests substantial amounts of money into the business to increase profitability.

Venture capital typically invests smaller amounts of capital to increase the growth rate.

Consider these differences in considering private equity or venture capital funding for your fundraise.

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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.