VC and PE funds do build businesses, says new Pepperdine study

BVWireIssue #123-2
December 12, 2012

A new study by Professors John Paglia and Maretno Harjoto (both at the Graziadio School of Business and Management, Pepperdine University) looked at the effects of private equity and venture capital financing among just over 6,800 small and mid-size business establishments from 1995 to 2009 to find that, after a financing event:

  • PE-backed establishments generated 129% more revenue growth and 257% more employment growth than their non-PE backed counterparts; and
  • VC-backed companies generated 846% more revenue growth and 608% more employment growth than their non-VC backed counterparts.

At the same time, the study reveals that minority, female, and foreign owners are less likely to receive PE financing (12.6%, 3.6%, and 38.8%, respectively) as well as VC financing (34.7%, 22.5%, and 45.6%). To read the complete report, “Did They Build That? The Role of Private Equity and Venture Capital in Small and Medium-Sized Businesses,” click here.

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