As recently as 20 years ago the USA began a transition from a declining industrial and manufacturing economy to an emerging entrepreneurial/innovation-driven economy. With this transition, the early-stage equity market has also evolved. As the institutional venture capital industry continues to focus on later stage and larger investments, the private investor market now provides the major source of seed and start-up capital. However, imperfections in the seed and start-up market have led to market inefficiencies for the high-growth firm. Two funding gaps appear to exist in the US equity market, both largely as a result of these market inefficiencies. This paper provides a broad overview of the early-stage equity market for high-growth ventures in the USA. In light of the critical role of business angels in the early-stage market, special attention will be given to this population. Also included is a discussion of angel markets and recent trends in the early-stage equity financing of entrepreneurial ventures.
