Impact of private equity and venture capital funding on sales and employment growth

What is it about?

This study reveals that PE and VC financing have positive impacts on single entity business establishments’ net sales and employment growth. The impact of PE financing on establishments’ growth is slower and smaller than VC financing. However, we find that the benefit of PE financing lasts longer than VC financing. We also find that ethnic minority, female, and foreign business owners are less likely to receive PE and VC financing. Finally, we find evidence that although establishments with government contracts are more likely to receive PE and VC financing, those contracts fail to produce marginal post-funding growth and employment.

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Why is it important?

Private equity and venture capital funding provide significant positive effect on firms growth and employment. However, minorities, women, and foreign owned establishments are still significantly less likely to receive PE and VC funding than than the white-male group, indicating the need for significant efforts to foster equal opportunity for minorities, women, and foreign owners to have equal access to capital.