Small businesses looking for an infusion of capital won't have much luck getting it from investment bankers or private equity firms, a new study shows.
In research by the Pepperdine Private Capital Markets Project, an ongoing research study at Pepperdine University's Graziadio School of Business and Management, the majority of investment bankers and private equity firms said there are few small companies that meet their criteria for investment.
According to the report, nearly 60 percent of surveyed investment bankers and 63 percent of surveyed private equity professionals said the number of quality small companies that are worthy of investment exceeds the amount of funding available to support their growth .
John Paglia, the lead researcher, said with a shortage of investment funds available for small businesses, capital providers should be clearer on the process they're using to evaluate prospects.
"The reality is business owners would be well-served to know about the types of capital available and if they meet investors' criteria," Paglia said. "This would save both businesses and capital providers valuable time and resources by better matching investors and investees."
The study shows that small businesses may be more successful in obtaining capital from an angel investor . More than 60 percent of those surveyed said the presence of super angels has increased in the space formerly occupied by venture capitalists, who tend to invest in start-up businesses that are often risky for investors. The research, designed to help better understand and increase the value of private companies, is based on surveys of more than 500 investment bankers and private equity executives.
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