Private Equity Vs Venture Capital. Similar but really quite different.

It’s more than sixty years since the birth of the Private Equity (PE) and Venture Capital (VC) industries, where both have evolved into ubstantial pillars of the investment landscape since their humble beginnings in the 1950’s.

While both sectors are now fairly mature, it remains surprisingly commonplace for business owners to use the terms PE and VC interchangeably. In concept, both are vehicles for capital to flow into private companies with the expectation of returns that beat the public markets, but the differences between these asset classes far outnumber the similarities.

In this short reading you will get an introduction to the two investment classes, and if you’re thinking of raising investment for your company the knowledge you’ll gain will help you to understand where you fit into the corporate finance landscape - and what you might want to think about when you pitch your business to GP’s (you’ll learn more about GP’s and LP’s shortly!).

Putting capital together for property developers

Increasingly when we structure a finance solution for property developers at £2m+ we are drawing on our equity partners to get the client across the line on the overall project funding.

As much as people may tout 100% finance (and yes, this is possible – if a very thorough business case is made), the reality is that any investor would prefer to see a developer make some show of financial involvement (just a few percent in many cases) to build a partnership for doing more business together in the future. And this is how we approach business when we source funds for developers – which has had the positive effect of bringing more funding partners to engage with us.

The right capital stack is about achieving balance – both in terms of returns and security for investors, and in terms affordability on the cost on the money overall – and we’re seeing this being achieved for more and more developers on some really great developments.

A case-study of development finance cross-collateralisation

Over the past 6 months something we’ve had requests for, on a number of occasions, is cross-collaterised development finance facilities, where developers will undertake a number of separate developments – but they want a pre-agreed funding arrangement to cover all the proposed sites. The facility size in each case has been in the region of £3m – £5m.

Positively, we’ve structured good solutions to each of these. In the case of multi-site residential projects we’ve seen good support with well-priced debt funding and even profit-participation agreements, and; on commercial developments with good tenant pre-commitments the joint-venture equity funding lines have been quite attractive.

All in all it suggests the positive market metrics, such as the recent RICS growth predictions, are carrying through to the marketplace – and to the developers we provide structured finance for.

Implementing property bonds into funding structures

This year we have been evolving our funding models to provide development finance for UK property projects, not only via secured debt facilities and private equity placements, but more recently with the use of property bonds. The question becomes one of choice and suitability, as costs and timing are key considerations when deciding which type of funding to employ.

We recently arranged a property bond for a hotel joint venture, where the property already existed and had a tangible value, but had upside potential via a schedule of improvement works and operational streamlining – if the client had the funds to acquire the site. Whilst being set up as a joint venture, it wasn’t feasible to deploy private equity investment due to the extended timeframes required for improving and enhancing the operational position of the hotel. Accordingly we structured a first charge property bond to allow a 3yr horizon for an exit or refinance of the property – giving investors a secure asset backed medium term investment, and at the same time giving the hotel company access to capital to acquire and improve a core operational asset.

To discuss funding models suitable to projects across the UK, we invite you to look over our website at or to contact us directly on:

+44 (0)7718 966556 /