In technical terms, venture capital is a subset of private equity. However, when it comes to making a profit, the only thing these sorts of investors have in common is the fact that they have money to invest.
A venture capital firm is looking for an exceptional management team on which to build a high-value business. Whereas a private equity firm seeks out undervalued properties that it can improve with the use of its resources. In addition, private equity investors seek out well-established companies. These investors frequently look for organizations that are experiencing difficulties as a result of incompetent leadership or inefficient operations. They then come in, make big improvements, and then profitably sell the companies. They offer a lower return on investment, but they also take on significantly less risk. Venture capitalist investors, on the other hand, seek out businesses with a high growth potential and, as a result, are willing to take on greater risk.
Whenever you bring in investors, you’re giving up some control over your company. A majority interest in the company is required by private equity investors, whereas venture capitalist investors just want a minority stake. Furthermore, private equity investors are looking to improve a company and then sell it quickly. They have no desire to stay in the business for an extended period of time. By contrast, venture capitalists are long-term investors.
At Alvarez & Diaz-Silveiria, we frequently serve as “outside General Counsel” when capital restrictions limit the ability of young firms to acquire competent and value-added legal advice. As a corporate law firm in Miami we have strong ties to major finance sources, such as venture capital and private equity funds, family offices, angel investors, commercial and investment banks, and specialized intellectual property lawyers. These connections allow us to help our clients establish and refine their business plans, as well as their financing and capital-raising strategies, while also providing critical introductions to possible strategic partners, investors, and specialists who can help them build and defend their enterprises.
If your business venture needs guidance, contact an M&A Attorney in Miami for help.