This chapter presents research to assess the impact of the recent financial crisis on technology-based small firms (TBSFs) in the United Kingdom based on findings from an extended telephone survey with the owner-managers of 49 young and 51 more mature TBSFs, undertaken in 2010. Even before the onset of the global financial crisis in 2007, it was generally acknowledged that TBSFs faced greater obstacles in accessing finance than conventional SMEs. This is because banks have difficulty assessing the viability of new technology-based business ventures due to information asymmetries, whilst risk capital providers may have difficulty providing appropriate or sufficient funds on terms acceptable to entrepreneurs. Given the recent difficulties that SMEs, in general, have faced in obtaining external finance, we would expect TBSFs to have been particularly adversely affected by the financial crisis. Our evidence showed that TBSFs exhibited a strong demand for external finance between 2007 and 2010, related to their growth ambitions and achievements. They sought finance mainly from banks but also with younger TBSFs seeking business angel finance and more mature TBSFs seeking venture capital finance. However, our evidence indicates that both debt and equity finance became harder to access for TBSFs, particularly for early-stage and more R&D-intensive firms. Where funding was offered, it was often on unacceptable terms with regards to the levels of collateral or equity required. The chapter provides evidence of a growing funding gap and concludes that the ability of TBSFs to contribute to economic recovery is hampered by ongoing problems in obtaining external finance.
Baldock, R., North, D. and Ullah, F. (2015), "The Impact of the Financial Crisis on the Financing and Growth of Technology-Based Small Firms: Some Survey Evidence from the United Kingdom", New Technology-Based Firms in the New Millennium (New Technology Based Firms in the New Millennium, Vol. 11), Emerald Group Publishing Limited, Bingley, pp. 201-226. https://doi.org/10.1108/S1876-022820150000011018
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