Both private equity and venture capital financing dramatically accelerate sales and job growth of small and medium-sized U.S. businesses, according to a new study being released by the Institute for Exceptional Growth Companies (IEGC) and Pepperdine University’s Graziadio School of Business and Management.
John Paglia and Agus Harjoto, associate professors of finance at Pepperdine’s Graziadio School of Business and Management, studied the performance of 8,669 establishments (individual workplaces) with fewer than 500 employees that received private capital financing between 1995 and 2009. During the five years following a financing event, the 6,815 establishments that received private equity:
- Generated a revenue increase that was $7 million higher (129 percent more) than a control group of non-backed establishments of similar size and characteristics. This translated into an 11.6 percent compound annual growth rate versus 5.7 percent.
- Created 36 more new jobs (257 percent higher) than the control group — a 5.6 percent compound annual growth rate versus a 1.8 percent rate for the control group.
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