A private equity investor, such as a private equity firm, pension fund, or a hedge fund, analyses the underlying business of the company in question.

If the investor decides to invest, it is in the investor’s interest to enhance the portfolio company’s growth by being an active owner and supporting the company with e.g. board work, recruitment, and internationalization. In turn, the investor receives an ownership stake from the company it invests in.

Finally, the investor conducts an exit of the growth company as PE investor’s are temporary equity holders. Exit can be executed in several ways, such as taking the target company to the public exchange.

Have you heard of the success stories of Wolt, Harvia, or Tokmanni? These are just a few examples of successful venture capital and private equity investments. In 2020 alone, the total value of new PE investments in Finnish companies totalled 1.35 billion euro. The industry is booming, as the investment volume has tripled between 2016-2020 and is expected to grow in the future as well.

In theory, Venture Capital is a form of Private Equity. However, Venture Capital investments are considered to be riskier as they are usually conducted in early-stage companies. Private Equity investors usually seek more established businesses that have already showcased their business potential.

In addition, Venture Capital investors usually require only a minority stake of the company whilst Private Equity investors prefer majority stake in order to develop the business more efficiently together with the target company. There are also some growth investors, who invest in more established businesses with a minority stake.