The difference between venture capital fund and industrial investment fund;
Different objects and categories
Venture capital belongs to the category of financial capital, which takes the whole startup as the business object and aims at obtaining the expected annualized expected return of capital appreciation realized by transferring the equity of the invested startup. The so-called enterprise creation process here includes not only the seed period, initial stage, expansion period and transition period before maturity, but also the reconstruction period of old enterprises; Industrial investment, on the other hand, is an investment method that directly takes products or services as the business object and aims at obtaining industrial profits. It belongs to the category of industrial capital, and its investment target usually points to mature industrialized enterprise projects with a certain scale.
Different levels of service and participation
Venture capital participates in the establishment process of the invested enterprise by providing entrepreneurial management services, including all the business management activities of the invested enterprise, and assumes all the risks of the enterprise under the guise of all its business projects and risks; Industrial investment is only aimed at the supervision of one or several projects of the invested enterprise, and does not involve other projects of the enterprise and its own affairs and management.
Different risk and profit models
The fundamental reason why venture capital and industrial investment have different profit models because of different business objects is that venture capitalists do not directly operate products or services, but operate through the invested enterprises, so there must be problems such as principal-agent costs and risks between venture capitalists and invested enterprises.
It is precisely because the risk of venture capital is not only the business risk of the invested enterprise, but also the principal-agent risk that venture capitalists can only rely on the expected annualized expected return of capital appreciation to realize the expected annualized expected return; Industrial investors usually operate their own products or services directly, and there are no problems such as principal-agent costs and risks in investment operation, so they usually only need to face operational risks and realize expected annualized expected returns through industrial profits.
(4) the timing of capital entry and exit
Different venture capitals invest in unlisted venture enterprises with high growth potential in the form of equity, and enter the establishment process of invested enterprises by providing entrepreneurial management services. When the invested enterprise is relatively mature, it will withdraw through equity transfer to realize capital appreciation. Industrial investment, on the other hand, is an industrialized enterprise project with a certain scale in the mature period, and it can hold shares within the legal period of the fund, regardless of the development degree of the project enterprise.