Monday, November 28, 2011

Growth Capital vs. Venture Capital

In 2006, when we began speaking about a growth capital fund in Israel, people had no idea what we meant. Invariably the response was, "Like a VC Fund, right?" Wrong.

What we, and other growth funds like us, target are:
  • Already successful businesses which can be made more successful;
  • Management teams building real businesses and focused on old fashioned things like profit and loss; and
  • Businesses for whom technology is a barrier to entry, not an way to create a new market.
Five years later the Israeli market now understands what we've been talking about. We see a steady stream of companies for whom growth capital is the right fit. And the VC-style companies tend to stay away.

The growth capital market is still in an expansion phase. But it isn't a huge market, and we don't expect it to become huge. VC will remain the predominant private funding market in Israel - and I expect that market to heal itself through a combination of reduced capital supply and a trend from consumer tech back to enterprise tech. But the growth market is a great niche market and an important addition to the private funding landscape in Israel.

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