Early stage business leaders say the knowledge gap is the biggest barrier to getting financing

• Entrepreneurs said the company’s valuation discrepancies and poor business records could derail financial transactions.

• 66% say that getting more venture capital will make a big difference in starting or growing a business

London, January 30, 2023 /PRNewswire/ — A new study published by the Venture Capital Trust Association (VCTA) finds that early-stage company entrepreneurs are struggling with a lack of information on how to access the external funding needed to support their growth plans.

The VCTA surveyed 240 senior decision-makers from recently established small businesses under seven years old and employing up to 250 employees. While an overwhelming majority (92%) of respondents will need equity financing in the next two years, nearly half (44%) say they do not have information on how to get it, a figure that rises to 47% of non-entrepreneurs. London and southeast.

Business owners’ financing deals often fall through with lenders because they can’t agree on a company’s value (43%), proven track record (42%) or fully developed business model (37%).

The VCTA survey highlights the critical role equity finance plays in helping early-stage businesses grow: two-thirds (66%) of respondents believe increasing the availability of venture capital finance will make a big difference to entrepreneurs looking to start or support them. Grow business. This is comfortably ahead of other factors such as local skilled workers (48%) and better local transport links and infrastructure such as broadband (34%).

Will Fraser-AllenThe chairman of the VCA commented:
“This research clearly shows that more work needs to be done by the venture capital industry to bridge the knowledge gap between young and fast-growing companies and to secure the funding needed to grow their capabilities.

“Young companies find it difficult, if not impossible, to get debt support because they are too small and young to fit the criteria of most lenders, leaving equity financing as the preferred way to achieve their growth ambitions.

The story continues

“Venture Capital Trusts are uniquely designed to overcome these obstacles when investing in young and innovative businesses. By their nature, entrepreneurs often lack a proven business track record, and their business model may need to be refined and refined by an experienced outside investor. Managers of early-stage companies They use evaluation to overcome problems and are more likely to find a solution that works for both parties.

Environment is not a barrier to development
Given the government’s agenda to improve employment, pay and living standards across the country, the VCTA study examined the importance of where entrepreneurs choose on their chances of success. Majority (88%) believe their current address is an advantage, only 3% say it is a hindrance and 9% believe it has no effect.

It is the opposite of what the companies were founded on. London And almost twice as many respondents (24%) based in the south-east outside these regions say their location is a ‘significant’ advantage (24%) compared to those based in the capital and surrounding areas (13%). However, a slightly higher amount London And business owners based in the South-East (90%) believe their area is generally to their advantage, compared with the rest of the UK (88%).

Will Fraser-AllenThe chairman of the VCA continued:”It is encouraging that such a large number of early-stage businesses see their local preferences as an advantage. VCT managers invest in established companies the length and breadth of the UK and have over 20 regional offices in towns and cities across the country. Investment professionals based in major cities are closer to companies in these areas and may have a better understanding of their needs. A local presence ensures that the availability of patient capital is well known and understood by local entrepreneurs.

“VCTs have a proven track record of creating well-paid jobs in innovative, fast-growing industries across the country. These companies deliver important economic and social benefits to the UK, from exports and tax increases to technology reduction and job creation, such as health in various sectors such as care, online retail and green technology.

To illustrate this, the average salary of an employee at a VCT-backed company in the North West. England Approximately £40,000, which is almost £10,000 higher than the average salary in the region. The average salary for VCT-backed companies in the North West has risen to £50,000.

in the West Midlands, the average salary of an employee in a company supported by VCT is more than £41,000 and more than £47,000 in companies supported by VCT. The average salary in the region is around £30,000.

About Venture Capital Trust Association

The Venture Capital Trust Association (VCTA) is the industry body representing twelve of the largest venture capital trust managers in the UK. Its members comprise over 90% of the VCT industry, with £6.6bn of funds under management invested in a wide range of regional local offices across the UK.

It is an industry body that actively works to create a regulatory environment to support early-stage businesses and unlock sufficient growth capital to accelerate the UK’s recovery in times of severe economic disruption.

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