Private Equity and Entrepreneurship: An Inequitable Match

This paper discusses investment options for entrepreneurial ventures and discusses appropriateness of private equity as an option.

Faced with economic challenges in the United States, we frequently hear in political discourse the virtues of entrepreneurship as a powerful paradigm for innovation and job creation. Unfortunately, despite this well-intended rhetoric, I believe we are paralyzed as a nation by our inability to enact meaningful legislative initiatives that would advance or nurture U.S. entrepreneurship. 

The purpose of this paper is to discuss investment options for entrepreneurial ventures and shed light on the appropriateness of private equity as an option by documenting my own first-hand experience as a founding independent director of an entrepreneurial venture that accepted financing from a private equity fund. I also contrast the value proposition of private equity with that required for the success of entrepreneurial and innovative ventures, and argue against the private equity firm investment in entrepreneurial ventures, which at best does not serve the interests of creating successful businesses that nurture innovation and create jobs. The conclusions and insights that follow are based on my years of extensive experience working with many entrepreneurial organizations at all stages of development.