Key differences between private equity (PE) firms and venture capital (VC) investment firms

The common:

Both investment firms are private equity class investors and fund managers who make money through capital gains in enterprises but perceive and manage risks vs. rewards very differently.
Both have a fund life of about 10 years, with a few extra years to extend to recoup their investment back for their investors.

The key differences (not a hard and fast rule):

	Venture Capital	Private Equity
Philosophy	Buying into short-term and high-risk for high-reward	Buying to control and sell
Investment model and decision-centricity	Invest in the founder’s ability to drive the innovative venture from the point of investment to a big valuation multiple for exit.	Invest in a stable, proven business model and profitable company with collateralized assets. Recoup capital through organizational restructuring and financial optimization to achieve scale and exit.
Stake (per financing round)	Minority (<20%)	Majority (30 - 50 %)
Who runs the company?	Founder-led	PE-appointed management team
With a controlling stake, most PEs have management decisions to drive the company to their target exit (usually IPO or trade sale)
Valuation approach	Revenue multiple	Profit multiple