The focus of this paper is to analyze the value of private equity in supporting and initiating economic development in the Republic of Croatia and the European Union. The paper aims to determine the characteristics of private equity markets in the Republic of Croatian and European Union, to explain advantages and disadvantages of private equity, to explore link between private equity and economic growth and development of the Croatian and the EU economy, as well as to explore trends and perspectives in private equity markets. The analysis was performed on the basis of available secondary data. The analysis results show that the Republic of Croatia belongs to a group of European countries whose tax and legal system is relatively unfavorable for private equity investments and at a same time entrepreneurs are uninterested, uninformed and conservative regarding this type of financing. The analysis also shows that the Croatian private equity market has not yet recovered from the crisis and there is a lack of capital needed for seed and start-up financing. The importance of private equity in European Union market is not equally distributed in all economies. United Kingdom is the largest economy in the terms of number of private equity funds and management companies, but private equity plays a significant role in the Germany and France as well. Private equity have not yet achieved its full potential in the EU market because the value of funds raised and invested did not yet reach the pre-crisis period value. The improvement can only be seen in divestment activity – 2014 data shows divestments hit record levels surpassing the pre-crisis levels.