Equity Capital and Entrepreneurs

H ow do smalland medium-sized firms raise external equity capital? In this paper, I describe two markets that entrepreneurs of smalland medium-sized enterprises use in the United States to raise equity: the organized private equity market and the market for angel capital. Both markets are important sources of equity capital for smalland mediumsized firms. However, until recently, not much was known about how the organized private equity market operated, while the market for angel capital still operates in almost total obscurity. In this paper, I try to shed some light on how these markets operate, and discuss some of the major issues that surround these markets today. In doing so, I draw on ongoing and new research done by others and me into the operation of these markets.