Scott Tominaga on the Growth-Venture Capital Debate

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 Scott Tominaga Weighs in on Growth Vs Venture Capital

 Growth or venture capital? In this blog post, Scott Tominaga examines these two investment approaches and shares his insights to help investors craft their investment strategies.

 

What is Venture Capital?

 

Venture capital, or VC, is a branch of private equity that focuses on investing in startups and other early-stage companies with tremendous potential for growth. Though often associated with Silicon Valley and the technology sector, many Venture Capital firms are willing to invest in young companies from any industry.

 

In contrast to traditional private equity funds, which tend to invest in a handful of established companies in mature industries, venture capital funds often invest in dozens of small firms. Though many, if not most, of the firms are expected to fail, the VC firm hopes that the outsized returns of the few successful companies will more than cover the failures.

 

What is Growth Capital?

 

Like Venture Capital, Growth Capital (also known as Growth Equity) is another subset of private equity. However, in contrast to VC, Growth Capital is an investment strategy wherein funding is given to older, more mature companies.

 

This has several goals, such as expanding capital, restructuring operations, and funding newly acquired companies. While VC aims to help new companies get off the ground, Growth Capital seeks to help established companies transform or modify their business model.

 

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The Verdict

 

Ultimately, Scott Tominaga believes both strategies should be seen as complements. In addition, he points out that the success of each strategy could depend on the current point in the business cycle, which means that investing in both approaches could offer an investor's portfolio some needed diversification.

 

In the end, Tominaga notes that regardless of the strategy employed, the most important factor may be the quality of the investment firms themselves. Though the highest-performing funds easily beat the overall market's returns on a risk-adjusted basis, most cannot equal such feats, making the choice of fund manager all the more important.

 

 

Scott Tominaga is PartnersAdmin LLC's Chief Operating Officer and has nearly 20 years of experience in the hedge fund and financial services industry. Visit this page for more on Scott and his work.