Royal bank Coutts has found that 72 per cent of entrepreneurs do not believe that venture capital is the best way for a business to realise its growth potential.
Despite the finding that 69 per cent of entrepreneurs say venture capital cash will help deliver faster growth to a company, the majority doubt the sustainability of the experience. Only 19 per cent of those questioned say that it is a sustainable system.
Further findings show that nearly a quarter of entrepreneurs (25 per cent) admit that VC investment is likely to increase the chance of business failure with only 37 per cent believing that investors in the space are interested in, or understand, entrepreneurs.
However, of those that had worked with venture capitalists, 74 per cent say they have had a ‘good relationship’ with investors and only 13 per cent acknowledge that they regret the decision.
Andrew Haigh, executive director for client propositions at Coutts, says that there is no doubt that entrepreneurs see venture capital as an important source of finance associated with increased growth for business.
However, he adds, ‘What our research shows is that when it comes to considering this source of finance, negative perceptions around the nature of venture capital and how to work effectively with these investors – which don’t reflect the true experience of those who have done it – are likely to cloud the judgement of entrepreneurs and get in the way of approaching venture capital with a mindset which will deliver a successful deal.
‘There is clearly an opportunity for more entrepreneurs to look again at this source of finance which could unlock future growth in their business.’
The research was based on qualitative findings from two separate focus group discussions with entrepreneurs and investors with experience in venture capital, and further research from a randomly selected sample of 244 entrepreneurs.
A further 12 in-depth individual interviews were carried out with those experienced in raising venture capital.