What does VC, PE and angel investment mean? What is the difference?

Haizhu Website: Author originating network: Ted Prince 2019-02-03

Part 4

VC:

In the early stage of the company's development, with a relatively mature business plan and business model, it has already begun to see the clues of profitability, and some VCs will also require that there is already profit or the scale of revenue.

VC is very critical at this time, which can play a role in enhancing the value of the company, including helping it gain recognition in the capital market and laying the foundation for subsequent financing; enabling the company to obtain funds to further develop the market, especially when it is most necessary to burn money. Provide a certain channel to help the company expand the market.

PE:

Generally, during the Pre-IPO period, the company has matured, and the company has already established the basis for listing, and has achieved the income or profit required by PE.

Usually provide the necessary funds and experience to help complete the restructuring structure required for the IPO, provide the funds needed before the listing financing, and help the company sort out the governance structure, profit model, and fundraising projects according to the requirements of the listed company, so that at least 1-3 Listed during the year. At this time, it is not necessary to choose PE. If there is no special prestige or means to help the company solve the listing problem, PE or the PE that cannot provide a large amount of funds to solve the pre-IPO funding needs, it is not particularly necessary.

The relationship between venture capital, angel investment and private equity investment:

Angel investment is a type of venture capital. Venture capital generally has a large amount of investment, and it is also invested in management while investing funds, and will gradually increase investment with the development of the invested enterprises. Angel investment funds are generally small, one investment, do not participate in direct management of enterprises, the choice of investment companies is more based on the subjective judgment of investors or even preferences.

Although PE and VC are both investments in pre-IPO companies, they are very different in terms of investment stage, investment scale, investment philosophy and investment characteristics.

A simple way to distinguish between VC and PE:

In the early stage of VC major investment enterprises, PE mainly invested in the later stage. Of course, the division of the previous and the late makes VC and PE different in terms of investment philosophy and scale. PE invests in enterprises in the seed, start-up, development, expansion, maturity, and Pre-IPO periods, so PE in a broad sense includes VC. In the fierce market competition, the business penetration of VC and PE is growing. Many traditional VC organizations are now involved in PE services, and many organizations that are traditionally considered to be dedicated to PE services also participate in VC projects. That is to say, PE and VC are only a conceptual distinction, and the boundaries between the two in actual business. More and more blurred. For example, well-known PE institutions such as Carlyle also involve VC business, and its investment in Ctrip.com and Focus Media is an investment in VC form.