Difference Between Business Development Company (BDC) and Venture Capital
Aspect |
Business Development Company (BDC) |
Venture Capital |
---|---|---|
Investment Focus |
Provides financing to small and mid-sized businesses (SMBs) through debt and equity investments. |
Invests in early-stage and growth-stage startups with high growth potential. |
Stage of Companies Invested In |
Invests in established SMBs with proven business models and revenue streams. |
Focuses on startups at the seed, early, or growth stages, often before they have significant revenue. |
Investment Structure |
Typically provides financing through a mix of debt and equity investments. |
Primarily, equity investments are made in exchange for ownership stakes in portfolio companies. |
Investment Size |
Provides financing ranging from small loans to larger debt and equity investments. |
Makes larger equity investments, often ranging from tens of thousands to millions of dollars per company. |
Risk and Return Profile |
Generally seeks to provide steady income and moderate capital appreciation. |
Seeks high returns through successful exits (e.g., IPOs, acquisitions) of portfolio companies. |
Time Horizon |
It may have both short-term and long-term investment horizons, depending on the investment strategy. |
Typically, it has a longer investment horizon, often ranging from several years to a decade or more. |
Investor Base |
Typically attracts income-oriented investors seeking dividends and some capital appreciation. |
Attracts investors seeking high-risk, high-reward opportunities, such as institutional investors and high-net-worth individuals. |
Regulatory Framework |
They were regulated as investment companies under the Investment Company Act of 1940. |
Subject to fewer regulatory constraints, although regulations may vary by jurisdiction. |