Glossary - Portfolio Company
A portfolio company is a business or entity in which a venture capital firm, private equity firm, or another investment vehicle has made an investment. These companies are part of the 'portfolio' of investments made by the investment firm. The ultimate goal in investing in these companies is to help them grow and achieve higher valuations, leading to a profitable exit for the investors through methods such as an IPO, sale, or merger.
Also known as
- Investee
- Investment
Use cases examples
- Venture Capital Financing Agreement: The term 'Portfolio Company' shall refer to any entity that is directly or indirectly controlled by the Venture Capital Firm as a result of its equity investment.
- Private Equity Firm Annual Report: Our portfolio companies have collectively achieved a year-over-year revenue growth of 20%, underscoring the effectiveness of our strategic guidance and operational support.
Considerations for investors
- Due diligence in assessing the potential for growth and scalability of the portfolio company before investment.
- Management of the portfolio company's performance and strategic direction to maximize return on investment.
Considerations for founders
- Understanding the implications of venture capital or private equity firms' involvement, including potential dilution of ownership.
- Navigating the expectations and relationships with new board members or advisors introduced by the investors.
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