Growth Private Equity - Investments In Technology

Upside Potential of Venture Capital with A Downside Cushion

While VC and traditional buyout investment strategies are well known to investors, Growth Equity has evolved and matured into one of the best performing private equity strategies over the last 15 years. In fact, Growth Equity performed the best over 10+ year horizon compared to VC and buyout PE, according to a Cambridge Associates study. Furthermore, Growth Equity portfolio companies grew revenue and EBITDA even during the global financial crisis (2007 – 2009). We have invited Arcis Capital Partners (“ArcisCap”), a NYC-based growth private equity investment firm, to share their insights on Growth Equity.

KEY TAKEAWAYS

• Growth Equity has outperformed VC and buyout strategies over the last decade
• Upside potential of VC with attractive downside protections
• Has performed well during the 2008 financial crisis and well-positioned for potential economic downturn

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GROWTH EQUITY BETTER RISK ADJUSTED RETURN PROFILE

For the level of risk taken in investing in a specific company, historical data suggests that Growth Equity funds have earned superior returns. ​

Over the last decade, Growth Equity has outperformed VC and buyouts.

GROWTH EQUITY SWEET SPOT

Growth Equity has different characteristics from both venture capital and traditional buyout private equity, and consequently represents a niche opportunity in terms of low risk-high return profile sought by investors.

Growth Equity firms create value by accelerating revenue growth and delivering targeted operational improvements with a hands-on approach unlike more traditional buyout strategies where extensive leverage is deployed to drive majority of the upside.

The chart above highlights typical capital types and associated strategies used over the course of a company’s life cycle.

PORTFOLIO COMPANY CHARACTERISTICS

The table highlights some of the key characteristics of typical candidate companies for venture, growth and traditional buyout strategies.

PORTFOLIO COMPANY RISK PROFILE

The table below highlights some of the key differences in risk profiles of target companies.