private-equity
Growth equity is a private capital strategy that takes a significant minority (sometimes a thin majority) in a scaled, often profitable company to fund expansion — with less leverage than a buyout and less product risk than venture.
Growth equity is what the fund does. Growth capital is what the company receives. The strategy sits between venture capital and control private equity: companies are typically past product-market chaos, often EBITDA-positive or close, and the cheque is large enough to matter without a full LBO capital structure.
Invest Europe and many LP allocations treat growth as its own bucket because the risk, fee and value-creation model differ from buyout.
Minority preferred shares, board representation, protective provisions (debt, M&A, related-party, budget), sometimes a path to more capital, rarely the full covenant suite of a leveraged loan. Exit is still the point: a later recap, a strategic buyer, or a sponsor-to-sponsor sale.
A fund writes €40m for 25% of a European software company at €120m pre-money. No new debt at close. The 100-day plan is sales capacity and a bolt-on. Compare a buyout of the same company: 50–60% debt, take-private mechanics, full control. Same sector, different product.
Founders like growth equity because they keep a majority and avoid max leverage. They dislike the veto list they discover in the shareholders’ agreement. LPs like the J-curve profile versus early VC; they still expect IPEV-consistent valuations each reporting date.
Founders hearing “minority” and skipping legal due diligence on reserved matters. Funds applying buyout playbooks (cost-out first) to a growth thesis. Treating growth equity as a valuation that venture metrics (ARR multiples only) can justify without cash discipline.
You cannot de-risk a competitive market with a minority cheque. Alignment fails if the founder wants a lifestyle company and the fund’s clock does not.
Growth equity diligence is still due diligence: earnings quality, customers, and a cap table that will survive the next round. Matching the company to growth funds rather than buyout funds is a mandate problem — which is investor matching.