Private or Public Equity? The Evolving Entrepreneurial Finance Landscape

Annual Review of Financial Economics, Forthcoming.

36 Pages Posted: 10 Nov 2021 Last revised: 11 Apr 2022

See all articles by Michael Ewens

Michael Ewens

Columbia Business School; National Bureau of Economic Research (NBER)

Joan Farre-Mensa

University of Illinois at Chicago - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: February 2, 2022

Abstract

The U.S. entrepreneurial finance market has changed dramatically over the last two decades. Entrepreneurs raising 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 startups 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 startups 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.

Keywords: Entrepreneurial finance, private equity, private firm, IPOs, venture capital, financial intermediation.

JEL Classification: G23, G24, G28, G34, G38.

Suggested Citation

Ewens, Michael and Farre-Mensa, Joan, Private or Public Equity? The Evolving Entrepreneurial Finance Landscape (February 2, 2022). Annual Review of Financial Economics, Forthcoming., Available at SSRN: https://ssrn.com/abstract=3958581 or http://dx.doi.org/10.2139/ssrn.3958581

Michael Ewens

Columbia Business School ( email )

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National Bureau of Economic Research (NBER) ( email )

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Joan Farre-Mensa (Contact Author)

University of Illinois at Chicago - Department of Finance ( email )

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Chicago, IL 60607-7124
United States

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