The aim of this paper is to investigate the effect of initial capital on survival of small and medium-sized manufacturing firms in Iran between 1981- 2005. The Industry & Mine Ministry data base has been used for data gathering, and the data were processed using Event-history analysis. A product-limit estimator (Kaplan-Meier) Model, is used for exploratory data analysis, and the comparison of survivor functions is used for comparing exit pattern of small and medium-size firms. Also a semi parametric Cox regression model is used for testing the hypothesis. The results support the survey's hypothesis and show that there is a positive relationship between initial capital and survival of small and medium manufacturing, firms. Also it was concluded that there are meaningful differences between small and medium-size firm's survivor functions.