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They both invest in companies, they both recruit former bankers, and
they both make money from investments rather than advisory fees.
But if you take a look beneath the surface, youll see that theyre
significantly different.
Definitions
Technically,
the term private equity refers to money invested in private compani
es
, or companies that become private through the investment.
Exceptions
There are always special cases:
Some VCs usedebtto make their investments, especially
for larger / later-stage investments.
Some turnaround PE firms buy less-than-stable
companies andfocus on operational improvementrather
than financial engineering.
Sometimes PE firms acquireless than 100% of a company,
especially firms that are growth equity-focused.
The People
Private equity firms focus on recruiting former
investment banking analysts the modeling and due diligence
work you do in PE is very similar to what you do on transactions in
banking.
Consultantsand anyone with an operating backgroundcanget
into PE, but its an uphill battle theyll always be skeptical over
whether or not you know how to build an LBO model.
VC attracts a more diverse mix youll see ex-bankers,
consultants, business development people, and even former
entrepreneurs.
In the early days the 1960s and 1970s many VCs had
entrepreneurial backgrounds, but today that is less true and many
Partners have never even worked outside of finance.
E-Commerce leader Flipkart's $210 million round - led by Russia-based DST Global - was the
largest PE investment announced during Q2'14.
The next two largest transactions were in the pharmaceuticals sector and involved investors who
have been operating in India for more than a decade now - Temasek and Warburg Pincus. While
Temasek paid a reported $170 million to buyout fellow PE investor ChrysCapital from Intas Pharma,
Warburg Pincus committed to invest $150 million in Laurus Labs including by buying out the stake
held by previous investor Fidelity Growth Partners India.
Flipkart competitor Snapdeal.com ensured it did not get left behind in the e-commerce fund raising
game and collected another $100 million - this time from investors like Temasek and Premji Invest
along with global asset management firm BlackRock and a couple of Hong Kong based hedge
funds.
With national election results out only in the last month of the quarter and new rules imposed by
the New Companies Act delaying a few deal closures, investors squeezed through bets on safe
sectors in Q2'14.
Led by the mega deals in e-commerce and pharmaceuticals, the IT & ITES and Healthcare & Life
Sciences industries accounted for 67% of the investment pie during Q2' 2014, Venture Intelligence
research showed.
The other prominent investments in IT included the Google Capital led $31 million investment in
Social CRM software maker Freshdesk, Axon Partners and Madison India Capital led $28 million for
remote tech support firm iYogi, the SAIF Partners led $25 million investment in online ticketing firm
Bookmyshow and IDG Ventures and Vertex Ventures-led $23.2 million investment in online travel
services firm Yatra.com.