The equity gap doesn’t exist and institutional investors are more than willing to back entrepreneurs in the sub-£2m category according to a report published by research company Library House.
Commissioned by UBS Wealth Management, the study Beyond the chasm: The venture-backed report – UK 2006, analyses every existing company in the UK that is currently venture-backed. Oft cited as a reason why small start-ups can’t progress, the so-called ‘equity gap’ is defined as companies requiring between £250,000 and £2m; Library House shows that in fact more deals took place below £2m than in any other size range.
The report also shows that the public sector is a significant backed of SMEs, and has doubled the funding available in the £100,000 to £500,000 range. Last year saw the government make £200m available through Enterprise Capital Funds (ECFs) to match private funding from venture capitalists or business angels.
Doug Richard, chairman of Library House, said: “This now begs the question that if there is no gap, is government policy, which is channelling significant amounts of public money into funds, the right way to support entrepreneurs? The issue that the UK confronts is not an equity gap – it’s a readiness gap. Companies fail to raise investment because they are not attractive enough to the investors, not because the money is not there in the first place.”