Growth Equity

Growth equity sits between venture capital and traditional buyouts. The companies are usually more mature than typical venture-backed start-ups, often with significant revenue and proven business models, and sometimes already profitable. But unlike buyouts, growth equity investors usually do not take full control or use large amounts of debt.

Companies use growth equity to expand into new markets, develop new products, make acquisitions or allow early shareholders and founders to sell part of their stakes.

For example, a profitable software company growing quickly might sell a 25% stake to a growth equity firm to fund international expansion, while its founders keep control.

Growth equity is generally considered less risky than venture capital, because the companies are more established, but it offers higher growth potential than many buyouts of mature businesses. Investors typically seek protections such as board representation and certain rights over major decisions.

Growth equity investors aim to exit within several years, through a sale of the company, a stock market listing or a sale of their stake to another investor.