Advantages of investing in venture capital (risk capital) or private equity

In recent years, venture capital (risk capital funds) or private equity has become one of the most effective ways to get large investment returns since its profitability has been far superior to those obtained through stock markets.

Additionally, one of the most attractive features of investment in venture capital funds (risk capital funds) or private equity is the independence that such funds offer compared to stock markets. Traditionally, investment in equities has been closely linked to stock indices, so that in times of economic and financial crisis, the results may go hand in hand. However, in private equity, venture capital funds are devoted to obtaining absolute returns, neither concerned nor affected by the upwards or downwards movements of the open markets.

Finally, a good reason to invest in venture capital funds (risk capital funds) or private equity is that the investor has access to all the internal information of the receiving company, which could be privileged information to investments in stock markets.

Risks of private equity

Whether it is a good idea to invest in venture capital depends on the type of investor (long, medium, short-term investor), since private equity, by its low liquidity, is a long-term investment type.

Ultimately, unlike the varying equities in stock markets, where the initial capital does not have to be particularly high, investment in venture capital funds (risk capital funds) or private equity requires significant financial resources.

Enrique Méndez & Karl H. Lincke

This article is not considered as legal advice

Karl H. Lincke

As an Abogado & Rechtsanwalt, Karl H. Lincke is a Partner at Mariscal Abogados and specialises in M&A, Company law, TMT law and Real Estate law. Working languages: Spanish, German and English. For any further enquiries please Contact us