AMERICA--INDEED, THE ENTIRE GLOBAL ECONOMY--is in the midst of the biggest boom in entrepreneurship the world has ever seen. Thousands of new businesses are being formed every month, not just in high-tech fields, but in traditional sectors where someone has a new idea for doing things differently. And existing businesses are being sold, combined and restructured at a dizzying rate. Closely held companies that once would have remained in private hands for decades are now being sold much earlier in their growth cycle.

All of this ferment has been accompanied by explosive growth in both the supply of capital and the variety of funding choices. The traditional sources of ...