ABSTRACT
The alleged existence of an ‘equity gap’ facing new and small enterprises is well documented in official reports. The potential of new technology-based firms and their initially parlous financial resources would suggest that they are suitable condidates for the more speculative finance of venture capitalists rather than bank debt. When investee companies within the portfolio of early stage venture capitalists need additional finance beyond the resources of their early stage investor, the funds are more likely to seek a trade partner or buyer. Little deal flow is directed from development capitalists to early stage organisations. One of the largest, early stage funds expressed the view that the deal flow directed from development capitalists, while existing, was essentially irrelevant to his business. A small majority usually arranged follow-on finance from among a limited number of development capitalists syndicate partners in seeking further finance for investee companies.
