About Venture Capital/Private Equity - Illinois Venture Capital Association

Private Investing in Private Companies

Venture Capital

Venture capital is money provided by outside investors for financing new, growing, or struggling businesses. Such investments are generally high risk, but offer the potential for above-average returns.

The influence of such investment extends beyond financial contribution. Many venture capitalists are highly active within their individual firms, aiding in the development of new products and services. By bringing experience, expertise, and business savvy to these enterprises, VCs can significantly influence corporate investment decisions and thus the area’s economy.

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Private Equity

Private equity serves a variety of purposes, and companies are frequently rejuvenated when acquired or funded by such a firm.

Buyouts fund an investor’s purchase of full control of a business. This may involve (a) purchasing the majority of stock in a private division of a parent company when the parent divests it or (b) buying majority stock in a private company along with its management team in a management buyout. When buyout funding is supplemented by additional money borrowed from lenders, it is referred to as a leveraged buyout.

Acquisition financing involves the use of private equity capital for consolidating an industry segment through the purchase of other companies.

Turnaround financing refers to capital invested in a company that is bankrupt or otherwise non-performing. With turnaround financing, a party with capital and management expertise acquires the business to improve its operations.

Statistics and examples highlighting the value of other private equity are outlined below:

  • Since January 2002, Illinois companies have raised $4.2 billion in non-venture private equity. Illinois-based funds manage $57 billion of other private equity assets.
  • Willis Stein & Partners, a Chicago private equity firm, acquired Jay’s Potato Chips out of bankruptcy in March 2004. By March 2005, revenue trends were positive, the company had introduced several new products, and 400 jobs were saved.
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Private Equity Is a Major Industry in Its Own Right

Apart from the impact of their portfolio companies, private equity firms represent a major business sector of Illinois.

Illinois is the headquarters for more than 100 private equity firms that manage funds totaling $77 billion, of which $65 billion is directly invested in companies and $12 billion is managed by funds-of-funds, which invest directly in private equity firms. Of the directly invested funds, $8 billion is venture capital and $57 billion is other private equity.


Over the past twenty years, private equity investment generated average annual returns of 13.7%. According to that rate, Illinois-based funds produce an estimated $6 billion in average annual returns to investors. These investors are primarily pensions, universities, and foundations, which reveals the vital role private equity plays in providing income for retirement, higher education, research, and charitable giving.


Private equity firms are large supporters of Illinois’ professional services sector, including legal, accounting, and consulting services. Based on an IVCA member survey, Illinois private equity firms pay service providers an annual average of about $1.7 million each, or $168 million in yearly total revenue.


The preceding numbers exclude private equity firms headquartered or with funds managed outside of Illinois. IVCA estimates that another 200 private equity firms operate in Illinois, including branches of out-of-state firms and firms that serve as advisors or brokers for funds that they do not manage.