Small businesses face funding problems

Small business start-ups are facing increasing problems securing funding as a number of large Venture Capital companies are scraping investments of under £10 million.

Some of today’s leading VC companies made their names backing small businesses, at the time, they had the foresight to see the investment opportunities of ambitious small firms with high growth prospects. Now, these VC firms are increasingly chasing larger projects and leaving the SME start-ups to finding funding elsewhere.

A spokesperson for FirstStage Capital who introduce VC companies to start-up companies commented that some investors will still show interest in small businesses that have already proved themselves, but those that are pre-revenue will struggle to raise funds. “During the nineties, there was a very high number of investors interested in small and medium enterprises, but in the last three or four years they have whittled down to a core group who prefer to invest in established businesses with a proven market. There is an equity gap on these small pre-revenue start-up businesses looking for sub-£2 million investments, which the Government has been focussing on.”

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