Small start-ups struggle to find funding, says the Times

06 02 2005 United Kingdom

A leading venture capital firm has pulled out of the start-up market, says the Times.

Apax Partners, which has £10 million invested in small start-ups, is moving out of this area of the venture capital market in order to finance bigger deals. This leaves smaller businesses anxious to find funding.

Jason Purcell, founder and chief executive of FirstStage Capital, which introduces venture capital firms to start-up companies, told the Times that, while investors may still show interest in small businesses that have already proved themselves, 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,” said Mr Purcell, “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 those small pre-revenue start-up businesses looking for sub-£2 million investments, which the Government has been focusing on.”

The Times correspondent commented that Venture Capital Trusts (VCTs), which celebrate their tenth anniversary this year, have failed in the past to create the strong flow of new capital for fledgeling high-growth companies for which they were intended.

Although there is big demand from businesses wanting to raise a modest level of funding, there are very few venture capital firms that want to invest in the range from £1 million to £4 million.