Private Equity: the three main fund types – venture, growth, buyout

Private Equity encompasses all equity investment operations in unlisted companies. This sector plays a central role in financing the real economy: it supports innovation, fosters SME growth, and facilitates business transfers. However, not all Private Equity funds pursue the same objectives or target the same types of companies. Traditionally, there are three main categories: venture capital (VC), growth capital, and buyout. Each corresponds to a different stage in a company’s life cycle.

Venture Capital: betting on innovation

VC (or venture capital) is one of the most well-known branches of Private Equity, largely due to the enthusiasm around startups and the tech ecosystem. Venture funds invest in young, innovative companies—often not yet profitable—that need financing to develop their technology, validate their business model, or acquire their first customers.

These companies are typically in the seed or Series A/B stage, and investment amounts are smaller compared to other branches of Private Equity. Tickets can range from a few hundred thousand euros to several tens of millions.

Venture capital funds take minority stakes and support management teams over the long term. Their expertise is crucial: they provide networks, mentoring, strategic skills, and facilitate follow-on funding rounds.

Typical target sectors: SaaS, fintech, biotech, cleantech, AI.

Advantages: extremely high return potential (exits via IPO or acquisition by a larger group).

Disadvantages: high failure rate, significant uncertainty regarding profitability, long investment horizon (7–10 years).

Examples of funds: Sequoia Capital, Accel, Partech, Serena.

Growth capital: accelerating expansion

Growth capital targets more mature companies than those in the venture phase. These are typically SMEs or mid-sized companies that have found their market, are profitable, and wish to scale: international expansion, product diversification, new distribution channels, or external growth.

Growth funds invest significant amounts (from €10 million to €100 million depending on the fund size) without necessarily seeking control of the company. The approach is usually minority, occasionally majority, but always collaborative.

Growth capital is often seen as a middle ground between venture and buyout: balancing risk with visibility on cash flows.

Typical situations: a family business seeking to grow without excessive dilution; a startup reaching scale-up status; an industrial SME preparing for internationalization.

Advantages: predictable growth, clear visibility on profitability, attractive exit multiples.

Disadvantages: sometimes high valuations, need for strong alignment with management.

Examples of funds: General Atlantic, Highland Europe, Eurazeo Growth, Bpifrance.

Buyout: transforming mature companies

Buyout (or capital transmission) involves acquiring mature companies, usually well-established in their sectors and generating steady cash flows. These operations often use leverage (Leveraged Buy-Out or LBO), combining equity with bank debt.

Buyout funds take majority control of the business and aim to create value through several levers: operational performance improvements, capital structure optimization, external growth, digitalization, international expansion, etc.

Buyouts are often used during business transfers: owner retirement, carve-outs of subsidiaries from large groups, shareholder restructurings, or founder exits.

Typical deals: acquisition of a private clinic, a construction company, or a fast-growing consumer brand.

Advantages: strong value creation potential, significant returns, clear exit strategy.

Disadvantages: high debt levels, economic sensitivity, complex financial and legal structuring.

Examples of funds: Ardian, KKR, PAI Partners, Cinven, Bridgepoint.

A shared goal: creating value

Although they differ in risk profiles, investment horizons, and targets, venture, growth, and buyout funds share a common goal: to support companies at key moments in their development and generate capital gains upon exit.

Private Equity thus enables the financing of the real economy, supports innovation, helps preserve family-owned know-how, and strengthens the competitiveness of European industry. It also plays a societal role by creating jobs and professionalizing business management.

Understanding these three major categories is essential for anyone pursuing a career in Private Equity, as well as for entrepreneurs and managers seeking to raise funds or prepare for a business transfer.