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Executive Summary

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  • 1. InterTradeIreland An Assessment of and Options for Early Stage Investment for SMEs on the Island of Ireland Phase One Report – Executive Summary – Final Draft May 2009 EXECUTIVE SUMMARY Introduction Equity Network InterTradeIreland’s mission is to enhance the global competitiveness of the economy of both jurisdictions on the island of Ireland for mutual benefit, through co-operative business, policy and research programmes, partnerships and networks. The InterTradeIreland EquityNetwork initiative was established in 2001 to assist the development of an equity culture on the island. EquityNetwork’s legislative remit includes promoting the use of equity funding. In order to advance this aim, it is currently actively involved in the sector and provides a wide range of relevant and tailored support including:  Investment Ready Advisory Service: One-to-one advice to early stage high growth ventures who intend fundraising within the following 12 months;  Education Programme: A suite of interventions to help companies at various stages in the fundraising process e.g. Investment Pitch Master Classes; Round Tables and a Business Planning Tool;  All Island Seedcorn Business Competition: this mimics the investment process and offers a prize fund of €360,000 including national and regional award categories. The competition is open to independent ventures to be incorporated in the Republic of Ireland (‘RoI’) or Northern Ireland (‘NI’) in the seed, start-up or early stages of their development;  Halo Business Angel Networks (North & South). EquityNetwork initiated the establishment of two Business Angel Networks on the island. These are designed to provide support and financial assistance to entrepreneurs who are keen to grow their business but lack the expertise, experience and funding required to successfully achieve this. The network in NI is jointly funded with Invest NI and in RoI with Enterprise Ireland. InterTradeIreland have recently made two new appointments to the Halo Programme these are part of a wider transformation which is intended to develop and increase the level of business angel activity.  Private Equity Conference: this annual conference (launched in 2002) attracts delegates from across the island and beyond including venture capitalists, corporate financiers, business angels, state agencies as well as those seeking funding. Purpose of Research and Definitions This report presents research which has been undertaken on behalf of the Equity Network to test the existence of a seed and early stage funding gap - mainly through desk research and extensive stakeholder (supply side) consultation1. Extensive consultation was undertaken with stakeholders from the VC / Business Angel communities; the Enterprise Agencies and higher education institutions 1 The specific areas in the Terms of Reference that are addressed in more detail in the main report are as follows:  Assess the demand for equity financing throughout the island on a sub-regional and sectoral basis, both in terms of seed and early stage capital for innovative SMEs; 1
  • 2. InterTradeIreland An Assessment of and Options for Early Stage Investment for SMEs on the Island of Ireland Phase One Report – Executive Summary – Final Draft May 2009 across Ireland in order to understand the demand and supply for seed and early stage funds. A survey of a small number of early stage companies was also completed. In this report, the following definitions have been adopted:  Equity Finance: Medium to long-term finance provided in return for an equity stake in potentially high growth unquoted companies. Provides equity capital to enterprises not quoted on a stock market.  Venture Capital: A subset of equity finance, this describes finance provided by investors to private companies with perceived long-term growth potential. Managed through professional VC firms.  Seed and Early Stage: The deal sizes with which this report is concerned are typically up to €750k in RoI and up to £500k in NI. Key Findings and Recommendations Need to Increase Supply of Equity Finance Feedback from stakeholders across Ireland clearly indicates a gap in the supply of equity finance geared to seed and early stage seed projects, and in particular for those projects with a technology or R+D focus. This can be attributed to a number of distinct factors:  a migration within the Irish VC community from a significant early stage focus 15 years ago to a substantially later stage focus today;  the private investor market in Ireland (be it wealthy individuals, BES or friends and family), insofar as it relates to seed and early stage investment, has seen a dramatic decline in the past 12 months due to liquidity issues and a diminished appetite for risk- based investment opportunities;  the Business Angel Networks in Ireland are less developed than other European countries where approximately half of their investment is into seed stage projects. The need for government support is robust as failure to provide this backing will result in the movement of Venture Capitalists out of high technology/ R+D early-stage deals completely, and therefore remove a key driver for growth in the Irish economy. Recommendation: There is a need for the supply of equity finance to be increased. This will require the involvement of the public sector to underwrite or reduce the risk to the private sector for appropriate projects. Review of Demand Levels  Review and analyse the existing sources of private capital on the island and their adequacy to meet SME early stage financing needs;  Define the gap, if any, for early stage equity financing for SMEs on an all island basis;  Assess whether gap, if any, constitutes a market failure;  Comment on any “non-financial” constraints identified in accessing early stage finance. 2
  • 3. InterTradeIreland An Assessment of and Options for Early Stage Investment for SMEs on the Island of Ireland Phase One Report – Executive Summary – Final Draft May 2009 There is no up to date demand information (statistics). The demand for early stage funding is difficult to project at present given the current state of change in the economy. There are some drivers which could increase demand and others which could decrease demand. Given constraints on other sources of equity finance, investment in innovation (part of the pipeline into seed and early stage) and the likelihood of more people considering setting up their own businesses, at a minimum, it is likely to remain at current levels, if not increase. Recommendation: We recommend that demand levels are closely monitored and compared with supply on an ongoing basis as the economies move through the current state of unprecedented change and recession. Need to Provide Access to Management Expertise Lack of finance is understood to be a major driver of company growth; however it is not the only driver. Equally important is the management expertise brought by investors, (including VCs and State Agencies), to investee companies. This support is often with strategy, management processes and international sales and marketing. VCs find that the time required to be invested in the early stage or seed clients is often so onerous that it is not cost effective for them to be involved. Projects with a technology or R+D focus are clearly critical to the economies across Ireland and there is a need to ensure that support is available to these projects to get them investor ready. There is a need for a support programme which will help suitable projects access the management mentoring that they need to help them grow. Recommendation: We recommend that projects with growth potential are provided with the specific management support needed to get them investor ready. Information Gap There is a need for timely reporting of information which examines the current demand and supply of funding to the seed and early stage projects across Ireland. This information should be reported appropriately e.g. by stage, sector, deal size, etc. There is also a need for consistent definitions to be applied across the industry. Published information on the supply of equity finance to seed and early stage projects needs to be produced quarterly by stage of deal. Recommendation: We recommend that equity finance activity information is updated quarterly and that this information is monitored to ensure that supply side changes are quickly identified. Equity Finance Activity - Seed and Early Stage - Statistics Benchmarking Ireland against Europe Ireland compares poorly with other parts of Europe when we consider the levels of investment in seed and early stage. According to the European Private Equity and Venture Capital Association (EVCA) Annual Survey in 2007, on average across Europe, Private Equity investments represented 0.571% of GDP. The UK had the second highest ratio: 1.033% (Sweden highest: 1.195%) and Ireland had the 6th lowest ratio: 0.300% (Portugal lowest: 0.104%). 3
  • 4. InterTradeIreland An Assessment of and Options for Early Stage Investment for SMEs on the Island of Ireland Phase One Report – Executive Summary – Final Draft May 2009 The European Business Angel Network (EBAN) survey of members (published July 2008) notes that about half of the investments made by angel networks are in the seed stage across Europe. Business angel finance is an important funding source for seed stage projects. As the Business Angel Network in Ireland is not as well developed as elsewhere in Europe, it is difficult for Irish companies to be able to access comparable levels of seed / early stage equity finance as is available in many other European countries from this source. Given that this is an important source of funding for seed and early stage projects, the relative lack of maturity of this sector has an adverse effect on the availability of equity finance for seed and early stage projects. This places those companies which are seeking seed finance in Ireland at a significant disadvantage in accessing funding relative to their European counterparts. RoI – Equity Finance Activity The IVCA Annual Report 2008 provides a snapshot of activity in the Irish VC industry and in particular, details of funds invested in 2006 and 2007 by stage. In 2006, less than 5% of funds were invested at seed stage and just over 20% was invested at start-up. The majority of funds invested (>60%) were invested at the expansion stage of business development. and just over 10% were invested at buyout. In 2007, the industry statistics show no funds invested at seed stage, just over 10% was invested at start-up, less than 30% at expansion stage and over 60% was invested at buyout stage. Drawing on information from the IVCA Annual Report 2008 and the IVCA Venture Pulse / Tech Pulse Activity reports, we note that the most common sectors in which funds were invested in between 2006 and 2008 were: Computer and Consumer Electronics; Consumer Goods and Retail; Life Sciences; Communications; and Energy and Entertainment, Medical Devices and Telecoms Software. IVCA Venture Pulse / Tech Pulse Activity reports provide a snapshot of investment activity in Ireland on a quarterly basis. These report on investments by size of investment, sector and investor(s); the stage at which the deal is made is not included in the report. The TechPulse report shows that almost a quarter of the 2007 deals were in the €0.25-€0.5m range, but only around 4% of the 2008 deals were in this range. However in 2008, 15% of deals were in an even smaller range i.e.: up to €0.25m whereas only 10% of the 2007 deals lay in this range. A significant initiative in the Irish VC market place is the Enterprise Ireland Seed and Venture Capital Programme which finances VC funds in partnership with the private sector. To date there have been three initiatives:  Seed and Venture Capital Programme 2007–2012 o Launched to improve access to finance for small and medium sized enterprises and to further develop the Seed and Venture Capital Industry in Ireland. o Enterprise Ireland committed to investing €175 million under this programme; o €148.75m has been committed to 8 funds (total fund values are in excess of €500m) o Includes only one fund with specific focus on seed and early stage: the AIB Seed Capital Fund (€30m, expects to make 50-60 investments, average 500k-600k). 4
  • 5. InterTradeIreland An Assessment of and Options for Early Stage Investment for SMEs on the Island of Ireland Phase One Report – Executive Summary – Final Draft May 2009  Seed and Venture Capital Programme 2000–2006 o Enterprise Ireland committed €98 million to continue to develop the venture capital market for SMEs in Ireland o Total fund €474m (EI 20%, others 80%) o 15 separate funds established o €295m invested across 503 investments o Across the lifetime of the programme 45.13% by number and 25.74% by value of investments in start up; 43.54% by number and 51.44% by value in early stage  The EU Seed and Venture Capital Measure 1994–1999 o Set up with the objective of establishing Venture Capital Funds to provide early stage small and medium sized enterprises in Ireland with equity capital o Total fund €147m (EI 30%, others 70%) o 16 separate funds established (1 did not make any investments) o €129m invested across 506 investments o Across the lifetime of the programme 62.65% by number and 35.29% by value of investments in start up; 27.47% by number and 43.30% by value in early stage. The number of funds established under the most recent initiative (8 to date, with almost €150m of EI’s €175m investment committed) is considerably reduced compared with the previous two programmes (16 and 15 respectively). Although the number of funds has reduced, the total value of the funds has increased. It is also worth noting that each of the Funds has a different investment policy – some focusing on specific sectors and many typically investing in companies which are more developed (i.e. beyond seed stage). In the current programme, only one of the Funds has a specific focus on seed stage (AIB Seed Capital Fund). This clearly indicates the migration of the Irish VC market from predominantly seed and early stage focus to fewer larger funds operating in the later stage market. In February 2009, it was announced as part of the Recapitalisation of Allied Irish Bank and Bank of Ireland that the banks have agreed to each provide €15m to new or existing seed capital funds with Enterprise Ireland (number of funds to be confirmed). Enterprise Ireland has committed €16m to the funds; the average investment size is expected to be €300k. Another key area of focus for Enterprise Ireland is the priority placed on creating and supporting high potential start-up companies (HPSUs) and increasing the number of enterprises that grow in scale to become international organisations. In March 2009, Enterprise Ireland announced that it had supported the establishment of 71 new HPSUs in 2008 (79 in 2007). RoI – Equity Finance Activity - Summary 5
  • 6. InterTradeIreland An Assessment of and Options for Early Stage Investment for SMEs on the Island of Ireland Phase One Report – Executive Summary – Final Draft May 2009 Analysis of available industry statistics provides an overview of current VC activity levels and other investment activity in seed and early stage in RoI. The information highlights that in Republic of Ireland:  the amount of VC funds invested in seed and early stage decreased in 2007 compared to 2006 levels;  whilst the number of funds under the Enterprise Ireland Seed and VC programmes (running since 1994) has reduced, the value of funds has increased; but under the current programme, there is only one fund (€30m) focused on seed;  a new seed capital VC fund (€46m) will be established – average deal size €300k; NI – Equity Finance Activity BVCA data for NI highlights that the amounts invested in early stage deals have declined from 2002 to 2007 and the number of companies in NI which have received early stage VC finance has reduced both in absolute terms and in relative terms2 between 2002 and 2007. NI has three local VCs and the two universities involved in early stage finance. At present only one of the VCs has funds available and is actively involved in this market. A £5m seed fund has however been recently launched and is projecting to complete approximately 25 investments at an average of £200k over a five year period. The Enterprise Investment Scheme is designed to help smaller higher risk trading companies raise finance by offering a range of tax reliefs to investors who purchase new full risk ordinary shares in the company. The amount invested in the scheme has decreased from £29m in 2004/5 to £7m in 2006/7. Business angel activity in NI is very limited: the Halo Network made just 6 investments in 2007 and 2008. NI – Equity Finance Activity - Summary Analysis of available industry statistics provides an overview of current VC activity levels and other investment activity in seed and early stage in NI. The information highlights that in NI:  VC Funds: o many are fully invested, however, Crescent II (which typically invests above £250k) has scope to make some further investments in the next 1-2 years; o while a new seed fund has recently been launched, it is projected to complete only 5 deals per year at an average of £200k; o Enterprise Investment Scheme: this has low activity levels with only 28 companies supported in 2006-07 (latest year for which data available); o Business Angels: activity levels are very low with only 6 deals in the last 2 years. As noted for RoI, this is an important funding source for seed and early stage deals and given that it is less well developed, this has an adverse effect 2 Expressing the number of companies receiving early stage investments in NI as a percentage of the UK – this has reduced by more than a factor of 4) 6
  • 7. InterTradeIreland An Assessment of and Options for Early Stage Investment for SMEs on the Island of Ireland Phase One Report – Executive Summary – Final Draft May 2009 on the availability of equity finance for seed and early stage projects from this source. Equity Finance Activity - Summary Industry statistics provided by the Irish Venture Capital Association (IVCA) and the British Venture Capital Association (BVCA) and from other sources provide a wealth of information on the state of play regarding seed and early stage funding. However, whilst a great deal of information exists, there are some limitations to the data which place constraints on the analysis which can be undertaken.  Lack of clarity / consistency of definitions: it is not always clear how ‘seed and early stage’ deals are defined / categorised and what criteria and/or funding levels are used to classify deals.  Timeliness: published information is not always up-to-date – for example until the Enterprise Ireland Seed and VC report for 2008 is published in July 2009, the most up to date data relates back to 2007.  Availability of data by stage of investment, by sector: data is not always reported by stage and/or by sector.  Availability of data by funding rounds: many of the data sets do not distinguish between first and follow-on funding deals so the number of companies which secure funding may be lower than the number of investments.  Lack of fully comprehensive information on investments made: not all of the published data sources include all equity finance activity. Given the uncertainty around funding at present it would be useful to have information on early stage deals by source of funding and stage and sector on a quarterly basis. This would allow a regular check on the supply of early stage funding and this could be assessed against the demand for funds, which may or may not also change significantly as the economy changes. The current economic uncertainty requires that a process is put in place to regularly review the statistics on both demand and supply and ensure that effective action is taken to rectify any gaps. Equity Finance – Seed and Early Stage – Supply Side Issues The stakeholder consultation highlights that a significant gap in equity funding exists for the seed and early stage investments. Supply of Equity Finance in Ireland – VC Funds The VC market in Ireland parallels what is happening elsewhere: Venture Capitalists will not support high technology or R+D deals at the early development stage, due to the high risks associated with these deals. The feedback from the VCs is that they are unable to play a role at this level due to the high risks associated with these projects and the significant levels of time and supports needed to develop the projects to get them investor ready. This is still a common occurrence across the world and was accepted as being the case by all those we spoke to in Government Agencies responsible for equity finance to SMEs. 7
  • 8. InterTradeIreland An Assessment of and Options for Early Stage Investment for SMEs on the Island of Ireland Phase One Report – Executive Summary – Final Draft May 2009 In the Republic of Ireland, VC Funds have ‘moved up the food chain’ over the past 10 years, with many early stage focused funds now operating at €75m and €100m fund sizes, where early stage investments are no longer of interest. There are significantly fewer funds focused on the early stage / seed market than previously. There is evidence that investors are moving away from the high end risk projects, so that even those funds which are marketed as being available to the seed or early stage markets are not investing significantly in these projects. Supply of Equity Finance in Ireland – Private Investors The private investor market in Ireland spans wealthy individuals, BES investors and ‘friends and family’. Ireland’s prosperity over the past decade, coupled with a more sophisticated appreciation of investing in private companies, led to this category of investors being a significant force in seed and early stage funding. However, in the past 12 months due to the impact of the recession, these individuals have experienced significant liquidity problems, both in access to cash or ability to leverage off other assets, coupled with an overall deterioration in portfolio values. This has led to a significant decline in appetite for risk based investments, and as such, the seed and early stage market has been severely affected in recent months. This lack of appetite is highly unlikely to change in the foreseeable future. Feedback from stakeholder consultation supported key findings arising from the review of industry statistics including the acknowledgement of a less well developed Business Angel Network in Ireland and the consequences this had on limited access to finance through this route for SMEs. The announcement of the proposed bank and government financed VC seed fund was viewed as a positive development. The level of BES investments has decreased from 2007 to 2008 (total value reduced by a factor of about 4); whilst recognising that not all BES investments are focused on seed and early stage, this substantial reduction in investment will have some knock on impact on availability of finance to such projects. Many parties that we consulted with identified a fall-off in funding in this area, while Enterprise Ireland indicated that the biggest issue in funding HPSU’s at present was the availability of matching funds, be it VC or private investor based. Supply of Equity Finance in Ireland – Banks Bank finance has never been a viable option for seed / early stage companies as the provision of security has always been an issue. However the recent €7 billion recapitalisation of Bank of Ireland and AIB includes a proviso that each bank allocates €15m of funding into equity investment in early stage companies. While this is a welcome development, it nonetheless represents a very small amount of the overall recapitalisation package (approximately 0.4%), and more or less continues existing levels of early stage equity investment that these banks were involved in. Supply of Equity Finance in Ireland: Summary The consultation has highlighted that there is clear market failure and there is a need for government intervention at the level of seed and early stage projects. Consultation with stakeholders highlights:  Investors (including those marketed as seed and early stage) moving ‘up the value chain’ and away from higher risk seed and early stage projects; 8
  • 9. InterTradeIreland An Assessment of and Options for Early Stage Investment for SMEs on the Island of Ireland Phase One Report – Executive Summary – Final Draft May 2009  VC Funds unwilling to get extensively involved in seed and early stage projects where significant investment is also required in terms of time and other supports;  Over the last 10-12 years, the number of VC funds which are focused on the early stage market and actively investing in this space has reduced;  volatility in the current economic climate as a deterrent to private investors funding seed and early stage projects;  a less well developed Business Angel Network in Ireland makes access to this source of funding difficult for SMEs;  some recent positive developments with government funding to banks in RoI stipulating an allocation for equity investment in seed and early stage projects. Equity Finance – Seed and Early Stage – Demand Side Issues Drivers of Demand for Equity Finance The demand for early stage equity finance is driven by a number of factors including the number of entrepreneurs in the system seeking finance and the availability of alternative sources of funding. The higher the number of start ups or early stage companies the more likely there is to be increased demand for equity finance. (However, it is important within start ups to distinguish between micro enterprises and HPSUs as not will require or be suitable for equity funding). It is a difficult time to write about the likely level of start ups as the economies across Ireland have been experiencing significant change over the last 12 months and much of the published data may not be the best indication of projected business start up rates for future years. In the past, the level of entrepreneurship activity has been significantly different across both economies on the island of Ireland. Northern Ireland is 9th out of the 12 regions across the UK for entrepreneurship levels (however the UK is ranked 12th out of 18th countries), whereas Ireland was listed as 5th on the same ranking for 2008. However, particularly in light of the current economic climate, a note of caution is required here: past trends are not necessarily robust indicators of future developments. The major change at this time is in RoI. The extent of downturn in the Irish economy is without recent precedent and this could impact positively or negatively on the numbers seeking to set up new ventures. The fact that the numbers of people out of work have doubled in RoI over the last 12 months (and in NI they have increased by 20%), could mean that with few other employment opportunities around, more people may consider setting up a business. However this is in no way certain, as alternatively the lack of certainty and the negative news reference growth and demand for services could have the opposite impact and could lead to an even more risk averse culture. The Economist Intelligence Unit has for example forecast four successive years of negative economic growth up to 2011 and highlights that even this may be optimistic. This lack of certainty about the economy makes it very unclear as to the likely impact on the number of people likely to consider setting up their own business in the future. The Bank of Ireland Business Banking register in January 2009 highlighted that that there had been a 21% decrease in new limited companies in 2008 9
  • 10. InterTradeIreland An Assessment of and Options for Early Stage Investment for SMEs on the Island of Ireland Phase One Report – Executive Summary – Final Draft May 2009 (compared to 2007). The number of failed companies also rose to 787 in 2008 compared to 281 in 2007. It has traditionally been the case that the demand for equity finance has been higher in the Republic of Ireland compared to NI. One of the main reasons for this is not only the differing levels of entrepreneurship which existed in the past, but also a different focus placed by the respective Enterprise Development Agencies on the provision of grants and the attitudes of entrepreneurs to equity finance (with Northern Irish entrepreneurs generally less willing to wish to release equity in their companies than their counterparts in the South). A further potential driver of increased start up activity could be the increased government investment in Research and Development and Commercialisation. The RoI strategy Building Ireland’s Smart Economy for 2009 to 2014 includes:  Up to €500m generated to create a venture fund known as 'Innovation Fund-Ireland' to target research and development projects in small businesses. This investment could lead to increased start up activity which will need funds to develop as projects.  More favourable tax treatment for those investing in start-up companies which focus on new technologies and products.  Market and brand Ireland as 'The Innovation Island', making it the destination of choice for entrepreneurs. A more favourable tax regime on the carried interest of venture capital will be introduced.  Increase production of renewable electricity to meet the increased target of 40pc by 2020. About €400m will be spent by the private sector building an extra 400mw of wind power. All of these measures could increase the numbers of people interested in setting up their own companies, which in turn could increase the numbers seeking equity finance. In NI, there are fewer start-up companies per head of population in comparison to the rest of the UK or Ireland. This situation is unlikely to change significantly unless there are significant changes to the push or pull factors impacting on start up levels. Demand for Equity Finance - Stakeholder Views Feedback from stakeholders across Ireland suggests that the demand for equity finance currently outstrips supply, with Enterprise Agencies highlighting the lack of private sector investors available to provide the co finance needed to support government finance and a small survey of InterTradeIreland seed corn finalists, highlighting lack of funding as their main barrier to growth. Other stakeholders highlighted that the current economic climate and the loss of many professional and managerial jobs is likely to lead to an increase in the number of people considering setting up their own business. Also it is anticipated that the level of graduate recruitment will fall and many graduates will seek to continue with their education into Masters of PhDs programmes and others may consider self employment or business start up. This in turn is likely to lead to increased demand for equity finance to support early stage ventures. 10
  • 11. InterTradeIreland An Assessment of and Options for Early Stage Investment for SMEs on the Island of Ireland Phase One Report – Executive Summary – Final Draft May 2009 Those projects which are deemed to be higher risk by VCs or Business Angels (generally technology based or projects with significant research and development costs) will face difficulties in accessing the early stage investment needed to get their venture developed. Economic Development Strategies across Ireland stress the importance of research and development and commercialisation of research, however it is these projects which will face the greatest difficulty in getting the finance they need to develop and grow. Demand: Summary Key issues regarding demand  Demand driven by numbers of entrepreneurs (RoI has higher levels of entrepreneurship than NI);  Demand also driven by availability of other sources of finance (extremely limited in current climate, particularly for what are deemed to be high risk projects);  Demand may increase as numbers out of work increase; demand will also be driven by investment in R&D and commercialisation (RoI);  Difficult to predict how demand will change in current volatile economic climate but given constraints on other sources of finance, investment in innovation (part of the pipeline into seed and early stage) and the likelihood of more people considering setting up their own businesses, at a minimum, it is likely to remain at current levels, if not increase. Equity Finance – Seed and Early Stage – Other Constraints Finance is not the only barrier to economic growth. Stakeholders highlighted that leadership and management capabilities, experience of start ups and international sales/ marketing experience were also critical drivers of company growth. Current research by the BVCA into the economic impact of private equity in the UK 2007 shows that private equity-backed companies are a significant driver of the UK economy. The BVCA’s research shows that private equity backed companies create jobs at a considerably faster rate than other companies. Over the 5 years to 2006/7, private equity backed companies’ sales rose by 8% pa compared with FTSE 100 companies and FTSE Mid-250 companies whose sales rose by 5%. Exports rose by 10% pa compared with a national average of 4% pa and investment rose by 11% pa compared with 3% pa nationally. 91% of responding companies said that private equity had impacted positively on company growth. Around half of respondents identified strategic direction, financial advice and help with contacts as being key ways in which private equity houses had helped the development of their businesses. The lack of involvement of VCs with early start up or seed projects not only impacts the companies through lack of funding but could mean that they don’t get access to the critical management expertise needed to support the company’s development. 11

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