Growth equity, also known as development capital, is a strategy that involves financing the growth of already established, unlisted companies with strong acceleration potential. Positioned halfway between venture capital and LBO, it helps support profitable or near-profitable companies in their expansion. Long reserved for institutional investors, this asset class is now opening up to informed individual investors. This guide presents everything you need to know about growth equity: definition, operation, differences from other private equity segments, returns, risks, and concrete ways to invest in it.
What is GROWTH equity?
Growth equity: definition and meaning
Growth equity, also known as development capital or growth capital, refers to a segment of private equity that finances mature companies seeking to accelerate their development. Unlike venture capital, which targets early-stage startups, it focuses on companies that have already proven their business model, generated recurring revenue, and built a stable customer base. These companies need capital to reach a key stage: geographical expansion, competitor acquisition, digitalization, or preparation for an IPO. It is also referred to as growth capital or, in the tech ecosystem, scale-up financing.
Which companies are funded?
Growth equity funds target a very specific profile: high-growth companies with a proven product that need capital to scale up. This includes SMEs in the scale-up phase, mature tech startups, artificial intelligence players, B2B services, and software providers.
Average annualized IRR over 10 years (Cambridge Associates / France Invest)
~10%
Target multiple on invested capital
2x to 3x
Typical investment horizon
5 to 8 years
Share of French private equity funds raised dedicated to growth capital
1/3
Criterion
Target company profile
Development stage
Mature, in acceleration phase
Revenue
€10 to €100 million typically
Profitability
Profitable or near profitability
Capital needs
Expansion, acquisitions, international growth
Preferred sectors
Tech, AI, healthcare, B2B services, consumer
How does growth equity work?
A minority stake
Growth equity distinguishes itself from other private equity segments by the nature of its stake. Funds take a minority stake, allowing founders and management teams to retain operational control while benefiting from the fund's financial contribution and support. This approach suits entrepreneurs who do not wish to sell their company but are looking for a partner to achieve a strategic milestone.
Value creation through growth
Unlike LBOs, which rely on financial leverage, growth equity primarily creates value through organic growth. Managers work with executives to accelerate development: opening new markets, commercial structuring, recruiting senior staff, complementary acquisitions, or technological investments. Funds also provide their network and sector expertise to the existing team.
The investment lifecycle
A growth equity investment typically follows a 5 to 8-year cycle. Entry into the capital involves thorough due diligence covering commercial performance, financial strength, management, and growth potential. The holding period allows for the deployment of the value creation plan. Exit occurs through resale to an industrial player, another fund, or an initial public offering (IPO). The J-curve, characteristic of private equity, is less pronounced than in venture capital because target companies already generate positive cash flows.
Here are the types of profiles funded in growth equity:
Tech scale-ups with a proven product and recurring revenue
SMEs undergoing geographical expansion or internationalization
AI, deep tech, and high-growth B2B services
Companies preparing for an IPO
Growth equity, venture capital, and LBO: what are the differences?
Growth equity vs venture capital
Venture capital funds early-stage, often unprofitable startups, with high risk and exceptional return potential on successful ventures. A venture fund invests early, sometimes based solely on the promise of a product. Growth equity comes in later, investing in companies that have already proven their model. The risk is therefore more moderate, as are the target multiples: 2x to 3x the invested capital, compared to 10x or more sought in venture capital.
Growth equity vs LBO (buyout)
LBO, or leveraged buyout, involves acquiring a mature company with the help of debt. The goal is to improve operational performance and resell for a capital gain. Growth equity stands out in three ways: the equity stake is minority, leverage is absent or very limited, and value creation relies on organic growth rather than financial engineering.
Growth Equity's Place in Private Equity
Growth equity holds a hybrid position midway between other private equity segments, making it attractive for investors seeking a balance between risk and return.
Criterion
Venture Capital
Growth Equity
LBO
Company stage
Startup, early stage
Mature, growing
Mature, profitable
Equity stake
Minority
Minority
Majority
Leverage
No
No / limited
Yes
Risk level
Very high
Moderate to high
Moderate
Target multiple
10x+ on winners
2x to 3x
2x to 3x
Horizon
7 to 12 years
5 to 8 years
What returns to expect from growth equity?
Historical Performance
Growth equity has historically delivered attractive returns, typically ranging between 10% and 15% annualized. According to France Invest, the 10-year IRR for French growth capital was around 10% at the end of 2024. Cambridge Associates reports comparable performance in the European and North American markets, with a significant premium over public markets.
Annualized return by private equity strategy
Net 10-year IRR comparison with the S&P 500
Sources: France Invest, Cambridge Associates, Bain & Company. IRR = Internal Rate of Return, the standard measure of a fund's annualized performance accounting for the timing of cash flows. Top-quartile venture capital represents the best-performing funds. Past performance is not indicative of future results.
Fund Performance Dispersion
As with all private equity, there is significant performance dispersion between the best and worst-performing funds. First-quartile funds show annualized returns exceeding 20%, while those in the bottom quartile struggle to surpass 4%. Only first-quartile funds, and potentially the top of the second quartile, significantly outperform public markets. Therefore, manager selection is crucial.
The Advantages and Risks of Growth Equity
The Advantages
Growth equity offers several advantages, making it a sought-after asset class for diversifying wealth.
Balanced Risk/Return Profile
Target companies have already proven their business model. More predictable multiples (2x to 4x) and shorter cycles (5 to 8 years) than in venture capital.
Exposure to Innovative Unlisted Companies
Access to mature, high-growth companies (tech, AI, deep tech, B2B services) that are not accessible via public markets.
Wealth Diversification Tool
Moderate correlation with stock markets, making it a relevant complement in a diversified allocation.
Risks to Be Aware Of
The main risk remains illiquidity: capital is locked in for 5 to 8 years, with no easy early exit option. The risk of capital loss also exists, although it is more moderate than in venture capital. Target companies remain susceptible to market downturns, competitive changes, or execution errors. Finally, the dispersion of performance makes fund selection crucial: a poor choice can lead to returns lower than those of listed markets once fees are deducted.
The Growth Equity Market in France and Europe
Growth equity is playing an increasingly important role in the French and European private equity landscape. Driven by the maturing tech ecosystem, the emergence of artificial intelligence, and the proliferation of scale-ups, this market is experiencing sustained momentum. According to France Invest, growth equity now accounts for approximately one-third of the amounts raised by French private equity funds. Institutional players are heavily invested in this area, as evidenced by the role of benchmark funds like Eurazeo Growth in Europe. In the artificial intelligence, deep tech, and B2B services sectors, this type of financing is often essential for transitioning from prototype to market dominance.
How can individuals invest in growth equity?
Accessible Investment Vehicles
Several vehicles allow individual investors to access growth equity in France, each with specific characteristics.
Vehicle
Target
Tax benefit
Typical minimum ticket
FCPR
Private markets, broad scope
Capital gains exemption (subject to conditions)
€100K to €1M
FPCI
Private markets, flexible
Capital gains exemption (subject to conditions)
Varies by platform
FCPI
Innovative SMEs (70% min.)
25% income tax reduction (reserved for JEI status)
€1K to €10K
ELTIF
European long-term
Harmonized EU framework
Varies
Compatible tax wrappers
The ordinary securities account (compte-titres ordinaire) remains the most flexible wrapper, with a flat-rate tax of 30%. Life insurance (assurance vie) offers increasing access to these funds as unit-linked investments, with a reduced tax framework after 8 years. The PEA-PME allows certain eligible funds to be held, but the FPCIs used by specialized platforms are not eligible. Regarding the IR-PME reform, the framework has been significantly modified by the finance laws for 2025 and 2026: the 25% tax reduction only remains for FCPIs invested in JEI securities and for FIPs in Corsica and overseas territories (at 30%). Classic FCPIs and FIPs no longer qualify for the reduction.
Good to know
The IR-PME tax framework has been significantly modified by the finance laws for 2025 and 2026. Please verify the applicable regime at the time of payment before any subscription.
Quel montant minimum pour se lancer ?
Historiquement, les fonds institutionnels de growth equity exigent des tickets d'entrée de 100 000 à plusieurs millions d'euros, réservant de fait cette classe d'actifs aux grandes fortunes et aux investisseurs institutionnels. Aujourd'hui, la démocratisation du private equity a abaissé ces seuils. Des plateformes spécialisées rendent désormais le growth equity accessible aux particuliers avertis dans un cadre réglementé. Chez Fundora, il est possible d'investir dans des stratégies sélectionnées avec rigueur, via un ticket institutionnel mutualisé qui démocratise l'accès au private equity pour les particuliers.
Investir en growth equity avec Fundora
Un accès au growth equity démocratisé pour les particuliers
Fundora et Kyoseil Asset Management, société de gestion agréée par l'AMF, rendent les stratégies de growth equity accessibles aux particuliers au travers de la gestion sous mandat. Concrètement, Fundora structure l'accès aux fonds via des FPCI et des véhicules dédiés de type SPV (Special Purpose Vehicle). Ce mécanisme mutualise les souscriptions de plusieurs investisseurs particuliers au sein d'une même structure, qui investit ensuite directement dans les fonds cibles. C'est cette mutualisation qui permet d'abaisser significativement le ticket d'entrée, là où les fonds institutionnels exigent habituellement des minimums de plusieurs centaines de milliers d'euros.
Une sélection rigoureuse des stratégies de growth equity
Fundora identifie et propose des opportunités d'investissement dans des stratégies de qualité institutionnelle, la gestion effective étant assurée par Kyoseil Asset Management dans le cadre du mandat. Cette sélection est fondamentale : la dispersion des performances rend le choix du fonds déterminant. Passer par une plateforme adossée à une société de gestion agréée AMF permet de se concentrer sur les gestionnaires qui ont prouvé leur capacité à générer de la valeur durablement.
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Examples of portfolio companies
Company
Sector
Valuation evolution
xAI
Artificial intelligence
$24B to $75B
Figure AI
Humanoid robotics
$2.6B to $39B
Anthropic
Artificial intelligence
Valued at $60B
Epic Games
Video games / 3D engine
$18B to $32B
Valuations as of the relevant reporting date. Past performance does not predict future results. Any investment carries a risk of capital loss.
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Fundora and Kyoseil Asset Management make global private equity funds accessible to retail investors through mandate management, thanks to expert selection, diversified strategies and a rigorous investment framework.
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