Private Equity Investment in High Growth Companies: Selection & Performance

Over the years, private equity buyout funds (PEs) have become increasingly interested in investing in high growth entrepreneurial firms, which has traditionally been an investment territory of venture capital funds (VCs). There is a dearth of study on how PEs invest and perform in the so-called “growth equity” space. The purpose of this research paper is to fill this void in the extant literature by comparing the characteristics of investments by PEs to those by VCs in entrepreneurial companies between January 1990 and December 2014. My research finds that both investment round size and company valuation are larger when PEs are among active round investors. Surprisingly, companies with private equity participation are less likely to exit successfully, however they are more likely to exit via IPO given successful exit.