If everyone stuck to their knitting, the difference should be, not equal to what it is, nor how it performs.
First, according to the denomination used by asset managers, as the limited partners providing most of the funds for venture capital, venture capital is part of the private equity asset class. For all the wrong reasons, the risk profile of private equity could not be more different than that of venture capital. A reason why venture capital is not held to the proper risk profile and its repeatable performance, in general, is quite deplorable, if not putting an undue burden on the thesis of innovation that determines what can be discovered.
In a large fund (pension funds, endowments, etc.), private equity typically contributes a low ten percent of all assets under management, with venture capital as a subset in the single-digit percentage range of all assets under management (AUM). Those funds also invest in other asset classes like Fixed Assets, Real Estate, etc. And despite the performance of venture having a low impact on the overall performance of all assets, CalPERS, as the largest of pension funds ($200B+) and trendsetter for other pension funds in the country, has been slowly exiting or diminishing its interests in private equity in general and venture capital specifically. Despite the massive Greenfield of technology innovation to be conquered, the venture capital system deployed today is not yielding repeatable and dependable asset-class performance.
Both private equity and venture capital constitute an investment in the stock of a private company. Private equity typically invests after a private company has crossed the chasm (Crossing the Chasm, a book by Geoffrey Moore), and venture capital is supposed to invest before the chasm.
It is supposed to because venture capital, as a result of its self-induced subpriming, has slipped the investment thesis into a post-chasm micro private-equity risk profile to technology innovation unable to consistently produce venture-style returns, despite diversification galore. And since the pursuit of prime risk has turned into the deployment of subprime risk profiles, anyone with a little bit of money now thinks they can yield prime returns from the pursuit of subprime risk, despite many who act as the self-appointed arbitrage of innovation not having the slightest clue about the kind of unprecedented foresight needed to spot outliers capable of producing venture style returns.
The latter is where angel investors, incubators, ICOs, etc., come in, all diluting the risk profile to become even more subprime amidst populous enthusiasm yet systematically unable to yield prime returns. An unprecedented outlier who breaks the norm cannot be found with a subprime investment thesis shaped by the norm of investor socialism.
Venture capital must be reinvented to pursue prime risk all over again, not with a system that regurgitates the ever subpriming sub-optimization of hindsight as the best proxy to foresight, but with a system that deploys prime risk in the diligent support of an outlier ready and capable of changing our world for the better.