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Published November 2022 | public
Journal Article

Private or Public Equity? The Evolving Entrepreneurial Finance Landscape

Abstract

The US entrepreneurial finance market has changed dramatically over the last two decades. Entrepreneurs who raise their first round of venture capital retain 30% more equity in their firm and are more likely to control their board of directors. Late-stage start-ups are raising larger amounts of capital in the private markets from a growing pool of traditional and new investors. These private market changes have coincided with a sharp decline in the number of firms going public—and when firms do go public, they are older and have raised more private capital. To understand these facts, we provide a systematic description of the differences between private and public firms. Next, we review several regulatory, technological, and competitive changes affecting both start-ups and investors that help explain how the trade-offs between going public and staying private have changed. We conclude by listing several open research questions.

Additional Information

We thank Minmo Gahng, Oleg Gredil, and Jay Ritter for generously sharing data. Kexin Feng provided excellent research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

Additional details

Created:
August 22, 2023
Modified:
October 23, 2023