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Venture Capital vs. Private Equity

Venture capital and private equity are often lumped together because both terms refer to firms that invest in companies and exit by selling their investment. However, there are several technical differences between venture capital and private equity funding. 

The main difference between venture capital and private equity lies in the business the investors choose to invest in. Venture capital investors are drawn to the growth potential of young companies whereas private equity investors prefer companies past the growth stage. 

Let’s start with the definitions before we dive into how each works. 

What is Venture Capital?

 Venture capital (VC) is the funding granted to startups and new businesses. Technically, VC is a form of private equity. VC is often associated with small companies that display significant growth potential. Investors are drawn to the high rates of growth and high returns that a company may provide.

This high growth potential is often fueled by elements such as unique innovation or carving out a new industry niche. 

Venture capital is an essential financing vehicle for startups because they may struggle to access funding sources due to their short operating history. VC gives these businesses capital and an opportunity to grow and build credibility. 

How Does Venture Capital Work?

Harvard Business Review estimates that more than 80% of the funds invested by venture capitalists go into building the infrastructure required to grow the business. For example, investors may provide funds for marketing and manufacturing or invest working capital. 

Additionally, investors may provide their expertise in the process of helping the company evolve. Further, VC investors tend to be well-connected and lead entrepreneurs to new opportunities. 

Venture Capital is Not Long-Term

The purpose of venture capital is to help build a business’ infrastructure and balance sheet. Essentially, an investor invests in an entrepreneur’s idea, helps to grow rapidly, and exits. As we said, about 80% of the funds are allocated to the company’s adolescent stage. 

Who Should Pursue Venture Capital?

Venture capital is an attractive option for new companies. For example, companies with a short operating history who are looking to expand their business.

Past the Growth Stage? Let’s Talk about Private Equity

Private equity (PE) is a source of investment capital that comes from high-net-worth individuals or firms that directly invest in private companies. These investments may take the form of:

  • Purchasing stakes in private companies
  • Acquiring control of public companies with plans to take them private and delist them from stock exchanges

How Does Private Equity Work?

Private equity provides companies with easy access to capital as an alternative to traditional financing options, such as bank loans. Traditional financing options may have high-interest rates and a slow approval turnaround. Additionally, private equity may provide the companies with more flexibility.

For instance, companies have the flexibility to use the funding to:

  • Fund new technology
  • Increase working capital
  • Stabilize a balance sheet
  • Make acquisitions

Who Should Pursue Private Equity?

Private equity investors often choose mature, established companies. But why would these established companies need funding? Typically, private equity investors provide funds for companies that are failing to make a profit due to inefficiencies, such as issues with management or manufacturing.

However, companies do not have to be struggling or failing to receive private equity. 

Looking For a Private Investor?

Crivello Capital is a private investment group focused on improving communities and impacting business owners’ lives through capital investment.

Wondering how to get a private investor to give you money? Lucky you, we have the answer right here. 

Then, you can apply for capital in four easy steps.

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What is Venture Capital and How Does It Work?

Venture capital (VC) is a form of private equity that gives investors the opportunity to support the growth of startups and young businesses. VC is often associated with small companies that display significant growth potential.

While such investments can be considered risky, the high returns and rush of helping a startup succeed make venture capital popular among investors.

In fact, according to The Economist, global venture investment is on track to hit a high of $580 billion this year. This figure is almost 50% more than 2020 and is 20 times the VC invested just two decades ago in 2002.

The process of venture capital can be divided into five stages:

  1. Seed stage
  2. Startup stage
  3. Emerging stage
  4. Expansion stage
  5. Bridge stage

Let’s review these stages and how VC funds are used to grow businesses.

What is Venture Capital?

Venture capital (VC) is an attractive option for startups or companies with a short operating history.

It’s defined as “a type of private equity investing where investors fund startups in exchange for an ownership stake in the business and future growth potential.”

Why is Venture Capital Essential for New Companies?

Venture capital is a significant financing vehicle for new businesses and startups. 

Why?

Because new businesses and startups, due to their short operating history, may struggle to access traditional funding sources.

Traditional financial institutions consider several factors in determining whether to offer a loan to a business.

These factors, both quantitative and qualitative, can include:

  • Debt-to-income ratio
  • Cash flow
  • Collateral
  • Industry
  • Credit score
  • Operating history

Many enterprises will not have these qualifications until later on in their business history and are, therefore, often denied loans from banks.

This leaves new companies with a gap in capital as they build their record and grow their company.

Venture capital fills this gap. 

How Does Venture Capital Work?

Venture capital can be split into five stages. In all of these stages, venture capital investors assist with the growth of a business.

The Seed Stage

During this stage, the startup is an innovative idea lacking structure.

Typically, investments during this stage are small and used for expenses such as product development, marketing research, and business expansion.

The goals of the seed stage include creating a prototype or perfecting a service as well as attracting more investors to the venture.

VC can start with the seed stage but doesn’t have to. Some VC investors may begin funding the enterprise at this stage; however, many will join in later funding rounds after the product is developed.

The Startup Stage

In the startup stage, enterprises have developed their product and created a business plan. However, the startup hasn’t necessarily sold any products yet.

In this stage, entrepreneurs need access to funds to drive their business forward. These funds will allow the business to manufacture and market its product. 

Investors may also offer their expertise in the process of helping the company evolve and lead entrepreneurs to new opportunities.

The Emerging Stage

The emerging stage, also referred to as the first stage, is typically the launch of the company. This is when the company will begin to see a profit.

The venture capital from this stage is often used to manufacture and market the product. Because of this, the investments during the emerging stage are usually much higher than in previous rounds.

According to Harvard Business Review, 80% of the funds invested by venture capitalists go into building the infrastructure required to grow the business.

The Expansion Stage

This stage, often referred to as the second and third stages, refers to when the company experiences exponential growth.

During this time, the enterprise will need additional funding to keep up with the demand for its products and services. The business will grow in various ways during this stage, such as with product diversification and market expansion.

Additionally, the company will likely begin seeing profitability and will utilize venture capital funding to create a stable, profitable future.

The Bridge Stage

The bridge stage is the final phase of VC financing. This stage is when the company has matured and established its infrastructure, product, and customer base. 

Many venture capital investors may choose the bridge stage as the best time to sell their shares. After all, they have successfully achieved their goal of helping to build and grow this enterprise.

Looking for Venture Capital Investors?

Crivello Capital is a private investment group focused on improving communities and impacting business owners’ lives through capital investment.

At Crivello Capital, we partner with companies that require investment to build, grow, or obtain more inventory. Our goal is to be the source of capital business owners need, providing flexibility where banks are rigid, and common-sense standards of lending where other private lenders are bound by red tape from their boards.

Our process is simple. We rely on data, research, due diligence, and our capacity to see and understand business opportunities. We are agile, flexible, and straightforward.

Read on to learn how we can help you build your business or apply for capital in four easy steps. Then, read on to learn how to find a private money investor.

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What is a Pitch Deck and How Do You Make One?

A pitch deck is the first tool entrepreneurs use to communicate with investors. First impressions are crucial and can make or break an opportunity. Your pitch deck should be designed to inform, intrigue, and excite investors. 

We’ll let you in on a little secret: the main goal of a pitch deck isn’t to get funding – it’s to make it to the next meeting.

What is a Pitch Deck? 

A pitch deck is a short presentation that entrepreneurs use to describe their business to potential investors. A pitch deck, also known as a start-up or investor deck, provides an overview of your business plan, products, services, and growth.  

What to Include in a Pitch Deck (and How to Make it to the Next Meeting!)

Even if you have been communicating with investors prior to presenting your investor deck, this is your chance to take the connection to the next level. The information in your pitch deck should be accurate, concise, and up-to-date. 

Create a Clear Cover Slide

For your cover slide, think: clean, crisp, and simple. Include your company name, logo, name, contact information, and tagline. Focus on minimal design elements that will intrigue investors without distracting from the essential information you are presenting. 

Introduce Your Business

This is an important slide. You should introduce your business, what it does, and why investors should invest in it. Here’s the trick: keep it clear, confident, and short.

Describe Your Business in One Sentence

We challenge you to try to describe your business in a tweet: 140 characters or less in language that your parents would understand. For instance, “We’re the Tesla of the investment banking industry,” implies innovation, luxury, and success.

Additionally, businesses often include a specific unique value proposition in their first side. 

Know Your Unique Value Proposition

A unique value proposition refers to the value a company promises to deliver to customers should they choose to buy their product. The goal of this statement is to convince the customer that their product or service will add more value or better solve an issue than similar products or services.

Entrepreneurs include this information in a pitch deck to show investors why their product is different from others and how they will convince customers to buy it. 

Describe the Problem Your Business is Solving

If your business isn’t solving a problem, you might have more issues than trying to put together a pitch deck. 

Consider introducing your problem with a story or in a way that investors can relate to. They’ve likely seen all the stats before– what makes your product different?

Define what the problem is and who it affects. 

Explain How Your Product is a Solution

Now that you’ve covered what the issue is and who it affects, you can explain to the investors how your product will solve this problem. This can also lead you to why your product will make the investors money. 

Demonstrate What Your Product Does

Provide proof that your product works. Consider adding statements from clients, specific scenarios in which the product worked, and visual elements such as photographs, graphics, or video of a demonstration.

Present Your Business or Revenue Model

This is your opportunity to explain to potential investors how your business will make them money. Consider these questions:

  • How much does it cost to make your product or provide your service?
  • Is this amount at all flexible? If it is, how so?
  • How much will you charge?
  • How does this pricing compare to your competitors?

Expand on Your Business’ Target Market

In this slide, describe who your ideal customer is and how many of them there are. 

Explain How You Will Market Your Product to Your Target Audience 

Include a brief description of your marketing plans to provide insight for the investors on how you plan to sell your product. You may choose to divide your market into groups and offer different strategies for marketing your product to them. 

For example, let’s say you are selling a foldable laptop and solving the problem of laptops being inconvenient to carry outside of the office. 

You may target Generation Z consumers by showing an influencer taking this laptop from bed to a coffee shop to an airport to a hotel resort because Gen Z trusts influencers, travels the most out of any generation, and prioritizes flexibility in the workplace. 

You may target millennials by appealing to their values because millennials often consider their social impact and want to align themselves with companies and products that are making a difference. In fact, 73% of millennials state that they are more willing to invest more in a product if it comes from a sustainable brand. 

Investors will want to see this research as well as research specific to your target market and product. However, remember to keep it short and only present the most relevant information. 

Provide Information About the Competitive Landscape

Answer some of the following questions:

  • Who are your competitors?
  • How do your competitors serve your target market?
  • How does your product or service compare to the competition?
  • What makes your product different from the rest of the competition?
  • What advantages do you have over these competitors? 

Financials: Show Them the Money

Include your sales forecast, income statement, and cash flow forecast. The information in this slide should be limited – no spreadsheets necessary. Limit yourself to profits, expenses, sales, and customers. 

Additionally, try to keep any projections realistic. You don’t want to scare off investors by including an overly optimistic projection; you might just make yourself look like you don’t know what you’re talking about. Instead, use past data to accurately predict growth. 

Talk About the Investment

Your investors need to know exactly what you are looking for and how you plan to use it. Further, include how the investment will help you to achieve your goals. 

Other Tips to Make A Successful Pitch Deck

Present High-Level Ideas

Your pitch deck should include high-level ideas and an overview of your business. Avoid details that may distract from the main points you are trying to get across to the investors.

Tell a Story

Focus on a story over statistics. While statistics are important to include in your pitch, you want to avoid presenting an excessive amount. Too many numbers may make your pitch boring and distract from the numbers that matter the most. 

Be selective with which statistics you include and tell a concise, relevant story with your pitch to help investors remember you.

Break Down Ideas

Try to limit yourself to discussing one idea per slide: what your product is, what the problem is, who the target market is, etc. Don’t shove multiple ideas into one slide if you find yourself with too many slides. Instead, look for information to cut out. 

Keep Your Pitch Deck Between the Correct Length

Your presentation should be between 10 and 14 slides and never more than 20 slides. 10 is acceptable but may cause your slides to be too crowded, so we suggest somewhere in the 12 to 14 range. 

What to Ditch in Your Deck: Elements Not to Include in Your Pitch Deck

Now that we’ve discussed what should be included in your deck, let’s talk about what shouldn’t. Here are a few examples:

  • Overly detailed or distracting visuals
  • Long paragraphs of text
  • Spreadsheets
  • Bullet points or long lists of statistics
  • Small or hard-to-read fonts. That scrolly cursive might look cool on your computer, but an investor shouldn’t have to squint to read the information on your slide. Stick to large, basic fonts. 
  • Unnecessary details
  • Too many slides. You want to keep the attention of the potential investors and respect their time. 

Looking for Capital?

Apply now with Crivello Capital. 

Crivello Capital is a privately held investment group. We focus on private credit and private equity investments in real estate, media, tech, and other business opportunities. We only pursue opportunities we believe provide attractive risk-adjusted returns. Learn more about our company and our mission, here.
Read on to learn how to find a private investor, here.

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Business Financing Types

Debt Financing


Debt Financing relies on your personal and company credit.  This is a good option for variable income issues or high growth phases. 


Apply for Debt Financing

Debt Financing & Working Capital Loans

One type of debt financing is a working capital loan.  Working capital loans are best used to fund short-term, operational needs. If your business is seasonal, if you find covering expenses when times are slow is threatening your ability to stay in business, a working capital loan is a good solution.

Examples of what a working capital loan can cover:

  • Adding inventory
  • Buying Supplies
  • Hiring More Staff
  • Paying A.P.

Who benefits from a working capital loan?

Companies in early startup and early growth phases often lack predictable revenue or the kind of historical data needed to get a bank loan or inspire VC or traditional PE investors.  A working capital loan is a way to cover expenses, grow and take market share to prove out a concept or to ride out a lull in sales or revenue.

Does everyone qualify?

No. But we are not like the Private Equity investors of the past or the Banks of right now.  We look at options to help you.  If a straight loan isn’t right for you, we explore other ways to collateralize the cash you need.  Our goal is to make your life better. Sometimes, that means taking a risk and trying something new and different.

Inventory Financing


Collateral is key to getting capital. 


Apply for Inventory Financing

Using what you have to get what you need

Using your current stock of inventory as collateral to purchase more inventory makes sense if your business is experiencing cash-flow issues but business is still good. As your company takes on more orders or builds new partnerships, you may find you need to stock more inventory than you can afford just yet.  This is where inventory financing comes from.

Different types of Inventory Financing include:

An Inventory Line of Credit

If your personal or corporate credit is not stellar, banks may be unwilling to grant you a business loan.  we can help with an inventory-collateralized line of credit.  The advantage to a line of credit over a loan is that you only pay interest on the money as you draw it from the line, not all at once from the moment of loan inception.

A.R. Financing

Accounts Receivable financing allows you to collateralize the debts other have to you.  They’re good for it, they just haven’t paid yet.  AR Financing helps with cash flow issues and takes away the worry of financing your own purchases of the next round of inventory.

The benefits of Inventory Financing:

Inventory Financing loans can be a lot cheaper than merchant cash advances, revenue-based financing or loans that are charged based on a percentage of your revenue, often costing more than 30%. IT’s a good option if your credit is not good enough for a working capital loan, if you have inventory to use as collateral, and if you’re looking to grow through offering more products.

Purchase Order Financing


When you need to pay your suppliers but have to allocate cash elsewhere. 

Support where you need it

Purchase Order Financing is like Accounts Receivable Financing but it is based, you guessed it, on your Purchase Orders to ensure your ability to repay.

Here’s how it works:

Once you have received a P.O. from a buyer & place your order with your supplier we step in and pay the manufacturer directly. The advantage is that your supplier is paid on time and gets you your goods quickly. The disadvantage might be that they are receiving the funds from a 3rd party which may alert them to cash flow issues.

Once the manufacturer sends you the product you ordered you then invoice your client because you are ready to ship to them. Your client pays their invoice, part of which goes to us and your company’s operations remain smooth.

Who should use P.O. Financing?

If you need more than $250K and have profit margins of> 20%, P.O. Financing might be the right choice for you.  If you want to pay specific suppliers but can handle the rest of your operational needs, P.O. Financing is a good choice.  However, if you are waiting for payment for goods you’ve already shipped, A.R. Financing (it Invoice Factoring) is probably a better choice for you.

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When is my business ready to raise capital?

You may have been told that the only thing to do now is grow, and to do that you have to raise capital. The fact is, that’s not always true. When it’s the right time to raise capital you’ll have to jump through quite a few hoops in order to attract the right investors. So how do you know what that time has come?

Half of all businesses in the United States fail within the first five years, 72% fail because they didn’t start with enough money. So whether you’re in growth mode or just starting out, capital is essential to your longevity and success.

So if you’re cash-strapped you might be thinking: I’ll just raise money. Before you do that, let’s review some of the indicators that you are – in fact – ready for a cap-raise (And some that you’re not).

You’re ready to raise capital if…

You have a strong, clear business plan

Failing to plan is planning to fail. Without a clear, well-structured business plan no investor will look at your company seriously and you are truly running from the back of the pack. Get into a peer-to-peer CEO/ Founder group ASAP and learn about what you need to create a business plan.

You have a ton of demand for your products and services… so much you just can’t keep up

If you have back-orders and are promising above your manufacturing ability, an investor sees their return laid out like the yellow brick road.

Your staff is maxed out.

If you don’t know your utilization rates just look around. Is everyone stressed, running on all cylinders, are balls getting dropped? You have to hire to meet demand. Think specifically about the roles you need and what impact they will have on profitability.

You know what the money is for

Just like your business plan, you should have an investment plan.

People send you new business

Reputation means something. If your clients are sending referrals that speaks to the quality of work that you do.

You’re not ready to raise capital if…

You’re just too busy, too too busy to commit to the process

Y

When you raise capital, you’ll need to take a step back from focusing on the business. If the whole thing falls apart when you get a cold, it’s time to hire a business coach, not raise funds.

You’re in a dying, shrinking or static industry

If you are making wingtip shoes, you’re going to have a hard sell to a VC Firm. Look at the growth trajectories and consider what you can pivot to if your industry is waning before asking for investment.

You’re a Control Freak

Be honest, if you can’t have input, you don’t want VC or PEG investment. Some investors are hands-off but you’ll have to account for your spending when its someone else’s money on the table.

You’re looking at an exit in < 3 years


If you think you’re going to sell in the near future, just hang on. having investors makes an acquisition less appealing because they’ll have to be bought out.