Venture capital and private equity in financing the SME sector in Central and Eastern Europe: evidence from Poland

Venture capital (VC) and private equity(PE) funds constitute an alternative to traditional external sources of enterprise financing, such as bank loans. This paper aims to examine VC and PE investment strategies and its implications for SMEs in Poland. The statistical data used in the article has been based on publications of the Polish Private Equity Association and reports of the European Private Equity and Venture Capital Association. The data indicate the following key results. First, we find that Poland PE shows a tendency towards concentration of investment on later stages of company development. Observations of Central and Eastern Europe markets also indicate limited preoccupation of PE funds with investment in start-up and early- stage entrepreneurial firms. Second, our results show that many PE firms presented in Poland are growing in size and, consequently, are aiming to employ capital in larger buyout transactions to improve deal, economics. This pattern of investment is not effective in closing equity gap for start-up and early- stage entrepreneurial firms.