Emerging Growth Companies (EGCs) . . .

are what venture capitalists are eager to add to their investment portfolios. They are companies that promise to grow fast and create a healthy return on investment for their investors. This is customarily achieved when the company, now just "emerging" as an attractive investment, does well enough to support a public offering or attract a corporate purchaser in three to eight years (or less with Internet companies). EGCs are usually in industries whose stocks tend to sell at high multiples of company earnings. These industries are attractive to investors because they take fewer dollars of earnings to support high stock prices when the investor later sells.

High tech companies are not necessarily emerging growth companies. While it is true that high tech companies have attracted a lot of venture capital investment, it is not because they are high tech. They have received funding because they tend to be in industries that support high price-earnings ratios.

EGCs include any company that presents good potential for rapid and sustained growth (growth in excess of the industry average or the gross national product). Low- or no-tech companies with the potential for rapid and sustained growth are being funded. The venture capitalist’s primary concern is final return on investment when the company stock attains liquidity, not the glamour of high tech. See: High Tech, Life Style Companies, Price-Earnings Ratio, ROI (Return on Investment).