Co-investment schemes are smaller investments in collaboration with the investments from equity or venture capital firms. This definition could also apply to two venture firms investing side by side or Limited Partnership (LP) investing with private equity firm. Co-investing schemes raise capital without an additional VC board member, if not, the startup has to perform better to attract more capital, consequently more board members to please.
Equity co-investments attracts other well established institutional investors by offering high potential returns without increasing the VC board members in the startup at a very low cost compared to cost incurred through private equity fund. Co-investing schemes are quite popular among Limited Partnerships (LP) because in certain situations LPs don’t have capital to invest in potential new opportunities to achieve higher returns and broader selectivity. These co-investments also give new investors a training ground to enhance their advisory and value adding skills while working alongside with their experienced venture capitalist peers.