The Equity-Financed Enterprise: Sharing Uncertainty to Support Investment

Galizia, Federico
Apr 2017
This essay takes a non-mainstream approach to small business finance and investment, with a particular focus on Europe. We advocate for greater use of external equity finance to support investment in uncertain environments. Equity, differently from debt, is designed to absorb the downside and to profit from the upside of future events. Ceteris paribus, external equity finance should reduce the risk for the entrepreneur, as it shares the uncertainty in a way that is not possible with debt instruments.