Venture Capital vs Growth Equity

Venture capital and growth equity are two related asset classes that are sometimes difficult to distinguish from one another due to inconsistent definitions. Like many investment topics, different definitions are used by different people when comparing venture capital vs growth equity. I hope that the below can help investors as they think about how they want to differentiate between the two asset classes.

Simple Definitions of Venture Capital and Growth Equity

Venture capital focuses on early-stage companies that possess strong growth potential that may also carry heightened risks (due to the unproven nature of their products or services). Traditionally, venture capital firms take a minority stake in these startups and provide guidance to help them achieve success.

Growth equity typically refers to investments made in companies that are further along in their development with a proven business model and more stable revenues. Growth equity investments often facilitate accelerated growth through expanding operations, entering new markets, or consummating strategic acquisitions.

In short, both venture capital and growth equity represent investments into private companies, but at different stages of growth. Venture capital generally focuses on earlier-stage companies and growth equity generally focused on later-stage or mature companies.

Understanding Venture Capital and Growth Equity

Venture Capital

Venture capital (VC) generally refers to equity financing provided to early-stage, high-potential companies. VC firms have traditionally invested in startups at the beginning of their developmental stage (although many companies are staying private for longer and accepting venture funding at more mature stages), seeking to capitalize on their potential for high growth and profitability. It is important to note that VC investments carry a relatively higher risk compared to other investments.

Some key features of venture capital investments include:

• High-risk, high-reward strategy
• Focus on early-stage companies with high growth potential (early stage venture)
• Involvement of the investor in company operations
• Typically longer holding periods (5-10+ years)

Growth Equity

Growth equity typically targets companies that are beyond the early stages of their development but still have significant growth potential. The purpose of growth equity investments is often to accelerate the growth of the firms, such as helping them expand into new markets or support strategic acquisitions.

Compared to venture capital, growth equity investments have some unique characteristics:

• Lower risk, as the companies have already passed the early developmental stage (“late stage” companies)
• Less potential reward (at the individual company level) compared to VC due to the lower risk profile (although a diversified growth portfolio may outperform a venture portfolio in many cases)
• Focus on expanding existing operations, entering new markets, or making strategic acquisitions
• Generally shorter holding periods

Key Differences: Venture Capital vs Growth Equity

Investment Stages

Venture capital (VC) firms typically invest in early-stage companies, often during their startup phase, while growth equity focuses on later-stage companies that have established a product-market fit and are seeking additional funding to scale.

Risk Profiles

VC investments tend to be riskier, with a high failure rate, as they invest at the early stages of a company’s development. Growth equity investments are less risky, as companies are already established and generating revenue.

Control

VC firms often invest alongside other VC firms, while growth equity investors often invest alone. VC’s often exert some control over the company’s decision-making process in the form of financial leverage and/or board seats. Growth equity investors may exert more or less control depending on the terms, conditions, and size of investment.

Majority vs Minority Stake

VC investments often result in minority ownership stakes, with the firm holding a significant but non-controlling interest in the company. Growth equity investments can result in minority or majority ownership stakes, depending on the size of the investment and the investor’s objectives.

Investors

Venture capital firms are the primary investors in VC rounds, while growth equity investments can come from a variety of sources, including private equity firms, “crossover funds,” institutional investors, and strategic corporate investors.

Holding Period

Growth equity investments generally have a shorter holding period, compared to venture capital investments, which can span over 10 years due to the longer development process of early-stage companies.

Use of Proceeds

VC funds are often used for product development, initial marketing efforts, and team expansion. Growth equity investments are used for scaling the business, expanding operations, entering new markets, or completing strategic acquisitions.

Return Expectations

VC investments typically seek higher return potentials, as they compensate for the increased risk associated with early-stage investments. Growth equity investments, on the other hand, tend to have lower return expectations, reflecting their lower risk profile.

Pros & Cons: Venture Capital vs Growth Equity

Pros of Venture Capital

• High growth potential: Venture capital firms typically invest in early-stage startups with innovative ideas and high growth potential, leading to significant returns if the company is successful.
• Support and guidance: Venture capital firms often provide valuable industry connections, mentorship, and strategic advice to help startups navigate through the challenges of growing their business.
• Funding for risky ventures: Startups with unproven business models and uncertain revenue streams may have difficulty obtaining funding from traditional sources, making venture capital an important source of funding for these companies.
• Exit opportunities: Successful venture capital-backed startups may lead to lucrative exit opportunities through acquisitions or initial public offerings (IPOs), which can generate significant wealth for both founders and investors.

Cons of Venture Capital

• Risky investments: Due to the nature of investing in startups, venture capital investments entail high risk, with a significant number of startups failing to realize their potential or even cease operations.
• Loss of control: In exchange for funding, venture capital firms typically require equity stakes and may influence strategic decisions, leading to potential conflicts between founders and investors.
• Pressure to grow: Venture capital-backed startups often face significant pressure to grow quickly and achieve high valuations, potentially leading to founders making unsustainable decisions or neglecting long-term goals.
• Dilution of ownership: Raising funds through venture capital results in the dilution of ownership for existing shareholders, including founders and early employees.

Pros of Growth Equity

• Lower risk profile: Growth equity investments usually target companies with a proven business model and established revenue streams, resulting in a lower risk profile compared to venture capital investments.
• Accelerated expansion: Growth equity can provide the necessary funding for companies to scale up their operations, enter new markets or pursue strategic acquisitions, facilitating accelerated growth.
• Longer investment horizon: Growth equity investments typically have a shorter holding period compared to venture capital, providing investors with a quick return of capital.

Cons of Growth Equity

• Lower potential returns: Due to the lower risk profile of growth equity investments, the potential returns may be lower compared to the high-growth potential associated with successful venture capital investments. However, this downside may be mitigated by diversification.
• Minority stakes: Growth equity investments often involve taking minority stakes in companies, potentially limiting the influence and control exerted by the investor.
• Limited availability: Growth equity funding may be limited to companies that have achieved certain milestones in terms of revenue, profitability, or market presence, making it a less accessible source of funding for early-stage companies.

The Bottom Line

Both venture capital and growth equity play pivotal roles in supporting and fueling the growth of companies at different stages of their life cycles. Having a clear understanding of these two types of investments can provide valuable insights when comparing venture capital vs growth equity.

VC investments primarily focus on early-stage, pre-revenue companies with potential high growth. These companies typically have unproven business models and require a significant amount of risk capital to develop their products or services. Growth equity investments target more mature operating companies that have established end markets and are at an inflection point where the growth capital can fuel expansion.

It is important to note that these two forms of investments are not mutually exclusive. There is a fair amount of overlap between venture capital and growth equity. Venture capital and growth equity investments each have their specific characteristics, risks, and rewards. As investors navigate the ever-evolving landscape of private company financing, understanding and employing the appropriate investment strategy aligned with their objectives and risk tolerance is as important as ever.

Is Kroll Monitoring Legit? A Review of Kroll Monitoring

Companies are hacked every day and every few months I receive a notification that my personal data has been compromised in a some company’s breach. These notifications often come with an offer for credit monitoring or protection.

The other day, I received a suspicious looking offer from Kroll Monitoring. There was no mention of a breach and although I have heard of Kroll, I didn’t know that they had a credit monitoring product. Phishing remains a serious threat these days, so I decided to do some research on Kroll.

Kroll Monitoring Is Legit

Fortunately, my research indicates that Kroll Monitoring is a legitimate company and Kroll Monitoring is a service frequently provided by companies to customers whose data has been exposed.

History

Kroll has a long and interesting history and has been in business for quite some time. Their services include notification and call center support, identity theft restoration and consultation, and credit and identity monitoring services provided to consumers on behalf of their clients. However, some people (including myself) have reported concerns about the company asking for sensitive information which has raised questions about the authenticity of the service. This is a common question about credit-related companies, such as TransUnion.

Features of Kroll Monitoring

Identity Theft Protection

Kroll Monitoring is similar to other competitors’ services. Their system monitors personal information, such as Social Security number, addresses, and financial accounts and alert customers of any suspicious activities or potential threats to their identity. This proactive approach allows consumers to take action quickly and protect themselves from potential harm.

Credit Monitoring

In addition to identity theft protection, Kroll Monitoring’s credit monitoring services offer additional protection. They monitor credit reports from all three major credit bureaus and inform consumers of any changes or inquiries made on accounts. This allows people to keep track of their credit health, spot any errors in their credit report, and get alerts when there’s a potential issue, such as fraudulent activity or unauthorized access.

Identity Restoration

In the unfortunate event that your identity is stolen or compromised, Kroll Monitoring offers access to their identity restoration services. Their team of experts works to guide victims through the process of recovering their identity. They provide assistance in contacting creditors, disputing fraudulent transactions, and providing legal guidance when necessary.

Financial Indemnity Insurance

Kroll Monitoring provides financial indemnity insurance as a part of their services. In the event that someone experience losses due to identity theft, they offer financial compensation up to a certain limit. This insurance eases some of the financial stress resulting from identity theft, and allows people to focus on restoring their credit and identity.

User Reviews and Testimonials

During my research on Kroll Monitoring, I came across varying opinions about the legitimacy of their services. Some users on the Better Business Bureau® website mentioned concerns about providing their Social Security number to Kroll Monitoring, expressing suspicion about their A+ rating claims.

While browsing Reddit, I found a post where a user received a letter from Lakeview Loan Servicing offering complimentary identity monitoring services from Kroll Monitoring. However, this user also hesitated to provide their Social Security number, which is a common concern (and one that I experienced).

Is Kroll Monitoring Legit?

In short, yes, Kroll Monitoring is legitimate. My own experience mirrors others in that I was not sure why they were contacting me or requesting personal information. If you receive something from Kroll, a company was likely hacked and your information was possibly compromised. Hacked companies (or their insurers) typically pay Kroll to reach out affected consumers and offer Kroll Monitoring. If you receive something from Kroll, I would double-check to ensure it is actually Kroll contacting you.

Kroll’s official website is krollmonitoring.com or enroll.krollmonitoring.com.

Frequently Asked Questions (FAQs)

Is Kroll Monitoring a scam?

Kroll Monitoring is not a scam. It is a legitimate credit monitoring service. However, double-check to ensure any communication is from Kroll and not a scammer posing as Kroll.

Is Kroll Monitoring safe?

Kroll Monitoring is a legitimate company, but providing one’s personal information to any company carries some risk. Credit monitoring services may help prevent and mitigate the risks of past data breaches, but these companies can be breached themselves (just look at Equifax).

What is Kroll Monitoring?

Kroll Monitoring is a identity theft and credit monitoring service. Companies that have experienced data breaches often offer Kroll Monitoring to those who have had their data exposed.

Is Kroll Monitoring free?

Kroll Monitoring is often offered for free to people who have had their data exposed in a data breach. The company who experienced the data breach typically pays for the service (or their cyber insurance provider pays for the service).

Is enroll.krollmonitoring.com legit?

Yes, enroll.krollmonitoring.com is a legitimate website and the official page to sign up for Kroll Monitoring services if your data has been exposed in a breach. Enroll.krollmonitoring.com is not a scam, so you can rest assured that the email or postal mail that you received is legitimate.

While there are many paid tools and services out there to help consumers monitor their credit and identity, I have found that many of the features and benefits can be obtained for free. Read on to learn how to monitor your credit & protect your identity for free.

Credit Monitoring

annualcreditreport.com

The first (and perhaps best) free service is through annualcreditreport.com. After registering with the site, consumers can obtain one free credit report per year from each of the three major credit reporting agencies (Equifax, Experian, and TransUnion). Checking one’s credit annually is good enough for most people most of the time.

However, there a couple of limited-time offers as a result of the massive Equifax breach. Since Equifax exposed millions of peoples’ data, it has agreed to provide up to six credit reports per year for anyone in the US. So, hypothetically, in any 12 month period, someone could get 8 reports (6 Equifax, 1 Experian, and 1 TransUnion).

Since the Equifax breach was so big, the three major credit reporting agencies have agreed to each provide weekly credit reports through the end of 2023. In my view, this is as good as any of the paid credit monitoring services out there.

Financial Institutions

One trend I’ve noticed is that many of the financial institutions that I work with offer varying degrees of credit monitoring. So if you have a bank account or credit card, check the firm’s website to see what they offer. Below are just a few examples:

Chase

Chase has a service called Credit Journey, which is powered by Experian. It is free to opt into and it provides the following:

• Credit report
• Identity Restoration
• Credit Insider
• Score simulator

Bank of America

Bank of America has an aptly named service called FICO Score, which is powered by TransUnion. This service primarily provides a credit score, but it does offer a free credit report through annualcreditreport.com and counts towards the one free report per 12 months from TransUnion.

Citi

Citi also offers FICO Score, but their version doesn’t say which credit reporting agency powers it and the free credit report offer is from Equifax.

American Express

American Express has a tool called My Credit Guide, which includes something called Vantage Score 3.0 which is powered by TransUnion. This tool provides credit score, some high level credit report details (like total credit available, number of accounts, length of credit history, etc) as well as score simulators, etc.

Separately, they have a service called FICO Score, which uses Experian data. This just shows an estimated credit score.

Free Dark Web Scan

Many paid services include dark web monitoring, although this can also be obtained for free. A quick google search indicates that Experian offers a one-time dark web scan for free. Its not ongoing, but it is helpful to check your data and resolve any issues you uncover. Additionally, dark web monitoring may be included in services that you already pay for. For instance, password managers (such as LastPass or Dashlane) include dark web monitoring. Many anti-virus and security services also include dark web monitoring for free. Why pay for things like dark web monitoring when its already included in something you already pay for?

Free Identity Theft Protection

Similar to the dark web scans, there are ways to get free identify theft protection from the credit reporting bureaus or from services that you already pay for. For example, TransUnion has a free service called TrueIdentity. Or if you pay for anti-virus or security software, it likely includes identity theft protection. Why pay for a dedicated service if the offering is already included in something that you pay for?

Paid vs Free

Many people prefer to pay for the above services, either because they do not know about the free options or they prefer the convenience of everything being in one place, a mobile app, etc. However, I believe it is important to know that you do not NEED a paid service and you can monitor your credit and protect your identity for free.