Expansion capital comes from growth equity firms, private equity firms, and some venture capital firms. Growth capital may also come from mutual funds and hedge funds. The goal of growth equity is to increase the company's revenue and profitability, typically by planning, funding, and growing operations. The process minimizes risk while working to maximize returns. Investors help create value with profitable revenue growth, and want consistent and modest returns for their effort.
Firms invest in the millions in exchange for a minority or majority stake in the company. The invested amount can range anywhere from $2M to $50M, depending on the industry. Investments in growth equity are held for a short amount of time, usually between 3 years to 7 years, from purchase to return.
Less than venture capital and more than private equity, the amount of money returned compared to the amount of money invested is about 3 to 5 times, known as the money-on-money multiple. The performance measure of growth capital, the internal rate of return, is typically between 30% and 40%.