Growth Capital, also known as expansion capital or growth equity, is a type of private equity investment made in a relatively mature company to fund its expansion plans, such as entering new markets, launching new products, or making acquisitions. It is typically provided in exchange for equity ownership, but without taking control of the company.
Growth capital is used by companies that:
Feature | Description |
---|---|
Stage of Company | Late-stage startups or mature businesses |
Type of Funding | Equity or quasi-equity |
Control | Investors usually take minority stakes |
Use of Funds | For growth—not for buying out existing shareholders |
Risk Level | Lower than venture capital, higher than buyouts |
Aspect | Growth Capital | Venture Capital |
---|---|---|
Stage | Later-stage | Early-stage |
Profitability | Usually profitable | Often pre-revenue |
Risk | Lower | Higher |
Ownership | Minority stake | Sometimes controlling stake |
Purpose | Scale operations | Build operations |
Growth capital investors seek:
They earn returns through: