Fundamentals
Growth equity is investment in an already growing company, often for a minority stake, to fund expansion rather than to buy control or pay off the owner.
Growth equity puts money into a company that already works and needs funds to grow faster. The investor usually takes a minority stake. The money goes into the business for hires, products, equipment or acquisitions.
For example, a company with $4 million of EBITDA raises $8 million to open new offices. The founder keeps control and the investor owns a smaller share.
Growth equity differs from a buyout. In a buyout, the investor usually buys control and often pays the owner. In growth equity, most cash goes into the company, and the owner typically stays in charge.
For owners, the choice depends on goals. If you want liquidity and a partner, a buyout or recapitalization may fit. If you want fuel for growth and control, growth equity may fit. See growth equity vs buyout. Related terms are leveraged buyout and minority recapitalization.
Related terms
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