Shifting sands: the changing nature of the early stage venture capital market in the UK

The UK early-stage venture capital market is currently experiencing major changes. With private funds - once the bedrock of start-up investment for entrepreneurs - moving away from the early stage, it is not just entrepreneurs but the economy as a whole that will be affected. The shift comes at a time when there is real pressure for the UK to build great global companies to match those of the US, India and China as well as a harsher environment in which to start a new business. But as long as investors continue drifting away from the smaller deals that new firms depend upon, many businesses will struggle to get a foothold

Venture capital: now and after the dotcom crash

High growth, innovative companies are disproportionately important for economic growth in the UK. Venture capital is an important source of finance for these companies, one of the few sources with an appetite for risk that matches the uncertainty that comes with pioneering, innovative ventures and the ability to provide management support to take a company from initial proof of concept to mass market growth. This has seen venture capital act as a catalyst for new industries and ground-breaking global companies. And yet, the venture capital industry in the UK has been in a period of decline. This has been particularly true for early-stage venture capital as NESTA outlined last year. This report provides an update on the venture capital market in 2009, examines similarities and differences between the current crisis and the one triggered by the dotcom crash and considers prospects for a recovery

Banking on each other: peer-to-peer lending to business: evidence from funding circle

As banks retrench in the wake of the financial crisis, small businesses have found it increasingly hard to access the finance they need to grow. But there is some cause for optimism. New providers of business finance are stepping into the space left by banks, and are devising innovative business models, often taking advantage of new technologies and different sources of capital. One such model that has grown rapidly in recent years is peer–to–peer financing. This report seeks to cast some light on the emerging field of peer–to–peer lending to businesses, using a large set of data collected through Funding Circle, the largest peer–to–peer business lending site in the UK. Funding Circle has facilitated approximately £100 million in loans to over 1,700 companies to date (as of April 2013). This report looks at the characteristics of both Funding Circle’s borrowers and lenders, which enables the examination of the decision to seek or lend money through the peer–to–peer sites or ‘platforms’. It is the first attempt to analyse the peer–to–peer lending to businesses model using proprietary data from from 630 investors and 89 companies

The venture crowd: crowdfunding equity investments into business

Crowdfunding is big business. The idea of financing projects or businesses with small contributions from large numbers of people is catching on in a big way and now accounts for significant amounts of money. In 2011 alone, $1.5 billion was raised through crowdfunding for projects and businesses in need of funds. Not only does the model provide finance but also access to a large number of people who can test and market an idea. Crowdfunding takes a number of different forms, the most successful of which has been the reward–based model where participants receive non–financial rewards in exchange for donating to a project. The model effectively harnesses not only the contributors’ desire for the reward but also the intrinsic or social motivations to back a project. Other forms of the model are, however, also growing rapidly. The most recent of these is equity crowdfunding, where individuals receive small stakes in a privately owned young business in return for investment

Reshaping the UK economy: the role of public investment in financing growth

High-growth, entrepreneurial businesses are essential to the UK’s emergence from recession. But their success is dependent on several factors, one of which is the availability of appropriate finance. The availability of growth finance has declined drastically in the credit crunch, and too little has been done to revive it. It will be impossible to transform and rehabilitate the UK’s economy without an equivalent change in our sources of capital.This shortage will not resolve itself. If left unchecked, it will undermine the innovative sectors on which the long-term growth of the UK’s economy depends. Government has an important role to play. Although there have been a large number of failed attempts by governments to stimulate the financing of high-growth businesses, there have also been notable success stories. By drawing out the principles of these examples, this paper sets out a proposal that offers a timely, efficient and smart way for the Government to support and stimulate investment in high-growth companies

Technology foresight for growth and productivity: Case study of UK digital health SMEs

Since the early 2000s, a significant number of corporate organisations successfully applied an innovative management approach to the monitoring of new technologies and the systematic analysis of their future evolution and impact. Despite the growing popularity of technology foresight amongst large corporations, there is little evidence on its use in SMEs. However, foresight might be very beneficial to SMEs that are facing technological changes, by enabling them to pool their knowledge about new technologies and thus to set priorities and joint efforts, in a systematic way, for the optimal allocation of their resources. This paper aims to develop and test a simple, effective and scalable foresight method specifically responding to the needs (and challenges) of SMEs in UK clusters. We illustrate the results of a foresight exercise that involved 16 SMEs in the London Digital Health cluster. The main novelty of this foresight exercise is related to the involvement of different entrepreneurs of different SMEs (rather than a team of managers from the same organisation, as it is usually the case of technology foresight in large corporations) and the adoption of a bespoke set of different techniques, tailored to the specific needs of SMEs