private equity

Spot the Difference – Private Equity and Venture Capital

September 15, 2020

 

Tommy Kim provides an article that explains the differences between Private Equity (PE) and Venture Capital (VC).

Private Equity (PE) vs. Venture Capital (VC). You suddenly realize that you are being presented with two similar, yet different types of capital sources. PE and VC investment management businesses offer investors different types of return on capital using unique risk profiles in long-term illiquid assets.

Whether you are interested in this side of the business as entrepreneurs and CEOs seeking capital or as investment managers seeking to expand your investment management franchise, they are two different types of businesses. As you are shopping for capital, here are the similarities and differences between PE and VC investment management and how they add value to our private capital market landscape and the global economy.

You had been confused at one point, not realizing that PE is actually different from VC. As you have met with both PE and VC managers, you now see that the difference is becoming more clear. Both VC and PE firms work with private capital investing in companies, add value over time, and exit investments through private sale or IPOs, public offerings. The biggest differences between PE vs. VC is in investment size and level of risk taken on each investment. In addition, PE and VC are fundamentally different in the number of deals they do and the size of capital they commit to each investment. Furthermore, PE firms seek no bad deals, while VC firms expect some or many to fail and hope that few would become a unicorn, deals that would be valued over a $1 billion.

 

Key areas include:

  • Types of private equity funds
  • Private equity target and blind funds
  • Return multiples sought in PE
  • Working in PE or VC 

 

Read the full article, Private Equity vs. Venture Capital: What is a Better Fit For You?, on Linkedin.

Welcoming new member Christopher Rischard

Umbrex is pleased to welcome Christopher Rischard.  Christopher Rischard spent eight years as Digital Leader in the TMT practice at Booz & Company based in Paris and Madrid focused on digitalization, data and tech-enabled growth strategy. After several years as a Principal, he set off as an independent consultant in London in 2014. Prior to Booz and his MBA at INSEAD, Christopher lived in Washington DC where he was raised and he worked for 8 years in enterprise solutions sales at MCI Telecommunications. Christopher would be delighted to collaborate on digital strategy, digital transformation and digital value creation engagements for both corporate and private equity clients.

Welcoming new member Brendan Rauw

Umbrex is pleased to welcome Brendan Rauw with Vulpine Strategies.  Brendan Rauw was a project leader at BCG in the private equity and healthcare practices, and spent ten years after BCG leading technology commercialization for universities.  Brendan has particular expertise in intellectual property, licensing, and entrepreneurship in the life sciences.

Brendan lives in Portland, OR, advising private equity investors and pre-revenue life science companies across the country on strategy, partnering, and market assessment.  Brendan is particularly interested in healthcare and life sciences projects relating to market analysis and due diligence.

Welcoming new member Andre Martinelli

Umbrex is pleased to welcome Andre Martinelli.  André has spent his career helping companies and people grow.  Prior to starting his consulting practice, André was a Director, Go-to-Market for Vista Consulting Group (VCG), the operations arm of Vista Equity Partners. Before that, André was a Managing Director at Blue Ridge Partners, a management consulting firm exclusively focused on helping companies accelerate profitable revenue growth. In both roles, André worked with portfolio company CEOs and Chief Revenue Officers to develop go-to-market strategies, build sales organizations, and implement processes and tools to deliver consistent, profitable growth. He began his career at McKinsey, where he returned after business school.

He lives in Michigan with his wife and two young children, and enjoys attending University of Michigan football and basketball games and heading “Up North.” Andre is interested in B2B sales effectiveness and go-to-market strategy projects, particularly for PE-sponsored companies in the Midwest.

Welcoming new member Seline Karakaya

Umbrex is pleased to welcome Seline Karakaya with Excelerate Global.  Seline Karakaya is Founder and Managing Director of Excelerate Global, a venture capital and private equity advisory group. In this capacity, Seline has worked with closely with companies ranging from start-ups to multi-nationals to support their growth priorities. She works closely with founders, CEOs, and Boards of Directors—often as an interim CXO—on the most pressing issues, from hiring to pricing, strategy to fundraising, organization to business
development.

Prior to founding Excelerate Global, Seline was a Director at American Securities, a New York-based private equity firm with one of the most successful track records in the industry. During her tenure, Seline co-led the development of the Firm’s “Shared Vision” process for value creation and alignment, advised portfolio company CEOs across a variety of industries and business topics, ranging from strategy and growth to talent and change management, and led the execution of a number of high priority initiatives. She also developed and oversaw the Firm’s commercial due diligence efforts.

Prior to American Securities, Seline was a management consultant at Bain & Company, where she spent over 6 years advising Private Equity, Retail, Consumer Products, Tech/Media executives on M&A, corporate strategy, change management, and growth initiatives ranging from product development to new market entry. Seline was among the original members of Bain Los Angeles’s Private Equity Group.

Seline was Chief of Staff at FEI Women’s Health, overseeing all strategic initiatives across the commercial aspects of the business leading up to its strategic sale to Barr Pharmaceuticals. She has also held positions at Amgen, Cerberus Capital Management, and American Express in a variety of capacities.

Seline graduated with the highest honors from the University of Southern California Marshall School of Business Honors Program with a B.S. in Business Administration, Strategy & Finance. She is also an active advocate of children’s causes in developing countries and animal welfare around the globe.

Seline is happy to collaborate on growth strategy and commercial value creation projects in the Western U.S.

Welcoming new member Deepak Batra

Umbrex is pleased to welcome Deepak Batra.  Deepak was at Bain for 6 years, predominantly based out of India working on global projects, and had an opportunity to work out Amsterdam and Boston. While his work was sector agnostic, Deepak specialized “functionally” in Private Equity due diligence.

Post his consulting stint, Deepak worked with OLX, India’s leading online classified platform (Craigslist counterpart) in several roles ranging from Analytics, Strategy to General Management.

He is based out of New Delhi, India, working as an independent consultant. Deepak would love to collaborate on commercial due diligence, customer analytics, NPS and projects in digital businesses.

Best-practice Purchasing & Value Creation

Michael Wise recently co-authored this article for McKinsey that explores how best-practice purchasing is now an even more potent source of value creation for private-equity leaders.

A careful review of purchasing is typically part of any private-equity (PE) playbook, with procurement savings factoring prominently into 100-day and longer-term business plans. As part of the process, procurement professionals are typically charged with finding and acting on low-hanging opportunities like requesting price reductions and volume discounts from suppliers. Leading PE firms are adopting a more comprehensive and transformative approach, powered by new digital and analytical tools, that can lift earnings before interest, taxes, depreciation, and amortization (EBITDA) by 20 percent within six months. These tools, combined with the right approach and methodologies, enable rapid sizing and capturing of the opportunity, permanently changing the way investment and management teams look at procurement—and other aspects of operations

In this article, we will describe the new approach, focusing specifically on the impact that digital tools, advanced analytics, and new methodologies have had on midsize-portfolio companies in a variety of industrial sectors.

 

The article explores the following:

-Identifying value potential

-Supporting value capture with e-sourcing tools

-Four elements of success

 

Read the full article, Digital procurement in private equity: Unlocking sustainable impact, on the McKinsey and Company website