Do You Know What the Difference is Between Venture Capital, Private Equity, and Debt Capital?

Have you ever heard the terms “venture capital” or “private equity?” Well, if you are starting a business, you will need to know what kinds of investors you need to contact and the difference between venture capital, private equity, debt capital, and how investors are categorized. You will also need to know about what conditions different forms of capital is distributed to aspiring entrepreneurs.

Debt Capital

What is debt capital? Well, you can think of debt financing as a loan from a bank that you have to pay back with interest. In reality, that’s exactly what debt capital is. Many entrepreneurs often resort to getting some debt financing to start their business. Debt capital, depending on its size, can be obtained from your regular bank or if it is a large sum of money, you might have to go to a special bank known as an investment bank. As far as the investor who is giving you the debt capital is concerned, debt financing is a much lower risk investment compared to equity capital. This is because debt capital is funding that is lent to you, just like as if you are taking a loan out for a car or a mortgage on your home.

What is the interest rate on debt capital? In most cases, when in investor who invests debt capital to a budding company, he expects to make at least ten percent off of the sum that was invested into a given company. Furthermore, debt financing is usually given to those entrepreneurs, who the investor believes is most likely believes will pay the debt off in due time.

Equity Capital

Equity capital, on the other hand, is different because unlike debt capital; you do not need to pay anything back to the investor. Equity capital is funding that practically every company gains as its business grows. Equity is usually invested out of a particular fund and is classified as either private equity and venture capital.

Private Equity and Venture Capital

Basically, private equity is an equity fund that belongs to either privately owned institutions or private individuals. Usually private equity is invested by institutional investors, who are people that specialize in investing private equity from such institutions. Institutional investors usually work for a private equity or PE firm that manages private equity. Venture capital is also private equity but is managed slightly differently than private equity. Venture capital is actually private equity that is usually reserved for investments to companies that have the potential for high growth.

For those of you who need financing and do not want to have to worry about debts, you would like to have some kind of equity capital, be it private equity or venture capital. This funding is much better than debt capital, because unlike debt capital, you do not have to pay the investors back. Instead, with equity funding, an investor makes money when a company cashes out. This usually means that when a company is bought by another company or is prepared for public offering, that is when equity firms make their money. The other side of the coin, however, equity capital is a much more risky investment for the investor than debt financing, because with equity capital, an investor makes money only with a buyout, initiate public offering or IPO, or an exit strategy.


As mentioned before, there are different investors and investing institutions. Some investors are wealthy individuals who invest their own money to entrepreneurs whom they like, whereas others work for institutions, such as private equity or venture capital firms and invest money from their institutional funds.

Angel Investors

Angel investors are wealthy private individuals who invest their money into a given entrepreneur for whatever reason. Some angel investors invest in a particular company because they might like that particular entrepreneur or feels charitable and wants to share their own entrepreneurial experience with other budding entrepreneurs to get on their feet. Other angels might invest in a company because a particular company might fit into that angel investor’s values, ethics, or other personal interests. If you have a wealthy relative and he invests in your company simply because he wants to help out a member in his family, he is also an angel investor.

Venture Capitalists and Institutional Investors

Unlike angel investors, venture capitalists and institutional investors do not invest their own money. Institutional investors usually work for a private equity firm and invest equity from funds that are usually parts of a pension fund or other types of funds. Venture capitalists are investors who solely invest in venture capital and work for venture capital firms.

Where Does the Money Come From?

Well, that is a good question. In the case with most successful private equity and venture capital firms, the money for investments comes from venture funds that these firms have raised. When a venture capital or private equity firm is successful with their investments, they are able to raise new funds for future investments. Again, as mentioned before, equity investors cash in on their investments when a company is liquidated by either being bought out from another company, etc.

How Do You Contact Investors?

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Learn to Team Build Event in One Hour

O.P.T.I.M.A.L. approach to organising a successful team building event

Planning a team building session but do not know how and where to start? Do not despair. This “dummy’s guide” to planning a team building session will give you important areas to consider and make you look like an expert.
The O.P.T.I.M.A.L. approach:

1. Objectives of team building

“Why are we holding this team building event, and what do we expect to achieve?”

To have an end in mind, a purpose, is crucial to planning a team building session. Having objectives mean that you can skew or tailor the activities to meet your expectations.

Having clear objectives would also help to set the tone for the team building session, and establish the expectations of participants involved, so everyone is moving in unison towards the same direction/ goal.

Having conducted team building sessions for a variety of organisations, some of the more common reasons why team building is required, are as follows:

a) To create synergy in a new team/ team with new members

b) To create an opportunity for staff from different departments/ functions to interact

c) To address certain work issues

d) To reinforce their corporate values

e) As a form of training

f) To reward their staff with a day away from the office

g) To interact and have fun

Each of the reasons listed above will result in emphasis on different aspects during the team building session. Spend some time to decide on the main focus of the team building session before deciding on the team building activities.

2. Profile of Participants

“Who will be attending the team building session?”

Another important factor in planning a successful team building session is the profile of the participants. Age range, gender mix and other background information like educational level and job scope, should be taken into consideration while sculpting the team building programme, to ensure that the programme would be suitable and relevant.

Physical conditions of the participants of the team building session should also be considered.

One other important factor to a team building session which organisers frequently overlook is FOOD. In a multi-racial country like Singapore, participants may be Chinese vegetarians or Indian vegetarians, while others only consume Halal food (food that is lawful and allowable under Muslim law) or even Kosher food (food that has been prepared so that it is fit and suitable under Jewish law). There may also be participants who are allergic to certain types of food. The best way to find out about dietary requirements is to check with the participants directly.

3. Time Frame for planning the team building event

“What is the targeted date of the team building session and its duration?”

Dates are important, especially when there is a need to secure venues and check the availability of key personnel or speakers. Typically, we would recommend a lead time of about 2 to 3 months to plan for a small to medium-sized team building event, catering for less than 80 participants. If the event is large-scale, the lead time may escalate to 6 months, or even a year before.

When conducting team building outside working hours, some organisations may wish to consider dates of school holidays or school exams, especially for organisations, which place emphasis of balanced work and family life. To encourage maximum attendance from participants, organisations may wish to leave the school examination and vacation periods untouched, for their staff to spend that extra time with their spouse and children.

Duration of the team building session should also be taken into account – is it going to be a half-day or full-day event? If there are specific issues to be tackled or other forms of planning or training involved, it may be good to consider a 2-day or even 3-day programme.

4. Inclinations of the participants

“What will the participants prefer to do during team building?”

Having information about the profile of the participants is usually sufficient. However, whenever possible, unearth the type of activities the participants are inclined towards – are they indoor-games type of people or the outdoor adventure type or do you have a good mix of both?

One can derive such preferences by having a poll or survey with the participants if you have an intimate group size, or by gathering the views of a sample group if your group size is overwhelming. Alternatively, reviewing previous team building sessions and the feedback received could also give a good indication of what is preferred (and what not to do again).

The rule of thumb is to have a good mix of indoor and outdoor activity especially if your size is big, unless you are deliberately exposing the participants to a particular type of setting, or you know their specific preferences.

5. Money Matters

“What is the indicative budget for the team building?”

The budget would have a significant influence on the venue, food and beverage, as well as duration and type of team building activity. If there are no figures to work on as yet, use the previous years’ budget as a guide. If no such information is available, then plan for something not too ambitious, and adjustments can be made from there.

Next, you have to decide if the team building portion is to be handled in-house or to be outsourced to an external vendor. Of course, if the budget permits, there are many advantages in outsourcing the team building portion.

Firstly, to run a team building event, you would need manpower and chances are, if your colleagues are running the event with you, they cannot participate. External vendors would likely be more experienced in conducting the activities and less likely to make mistakes. The vendor would also provide all the logistics involved, leaving your team and yourself free to participate with all your other colleagues.

team building vendors also bring with them sufficient experience in knowing what works and doesn’t, so you are not only paying for their services, but also their rich experience.

6. Assessment of Success

“How would you measure the success of the team building session?”

How would the success of the session be measured? Is it considered a success as long as the participants enjoyed themselves, or if the participants got to know at least 3 other colleagues better?

While the effects of team building are generally intangible and the takeaways are somewhat more subtle, measurements of success can be derived from verbal feedback from participants, surveys or observation reports. Observation reports comment on behaviors and attitudes displayed during the activities. Pre and/ or post-event surveys track the effectiveness of the team building session based on the same set of questions they organisers wish to enquire about.

7. Location for team building

“Where should we hold the team building session?”

The location or venue would have an effect on the atmosphere of the team building session. The previous six factors mentioned above would have shaped the decision on where to hold the team building.

Other issues relating to location for consideration would be accessibility, function set-up and layout and contingencies for wet weather (if you are having an outdoor session).

With the O.P.T.I.M.A.L. approach developed by änergy, we trust that you would be able to plan for your team building event effectively. If you are running the team building event with your committee internally, be sure to draw up a detailed work plan and budget, with clear responsibilities for every task.

Next, remember that one of the key ingredients of effective team building is rehearsals. You would need to do a site-visit and rehearse the day’s activities, as it would help you trouble-shoot any potential issues, so that improvements can be made on event day and contingency plans are already in-place to tackle any glitches.

We wish you a resoundingly successful team building session!

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