Venture capital firms have the same business model as buy-out firms, but their focus varies. Venture funds invest capital in start-up and young companies with little or no track record. Buyout/growth funds focus on another part of the business cycle. They invest capital in more mature businesses that are underperforming or that have the potential to outperform the market with sufficient capital and normally by means of operational improvements.

They both seek to own and operate these businesses, typically for about five years, creating value by improving operations, governance, capital structure and the strategic direction of the companies in which they invest.

In recent years, the distinction between venture capital and buyout funds has blurred. Venture capital funds have been investing more heavily in companies at later stages of development, while private equity firms have been investing in companies that more closely resemble start-ups. In the end, both venture and private equity firms earn their money in the same way — by acquiring companies, developing them into healthier companies, and finally finding new owners and realize the value created.