Angels Den Blog

A study carried out by Kingston University suggests that small businesses are not only surviving the recession, they’re positively thriving in these unsettled times. Of the 343 companies involved in the study around 48 per cent have maintained or increased their profits. Not bad when the predictions were that small businesses would suffer horrendous losses in this recession.

It is true that the very survival of many of these firms has been down to the credit they have sought. Of course this credit is not available through the banking system. That would be absurd, no right-minded company in 2009 would consider the possibility of a bank loan as anything more than a story that elderly entrepreneurs talk about around campfires when they tell of times gone by. No, this credit unfortunately has come from credit cards, personal savings and family lending, all of which come with rather uncomfortable side effects. I’m sure some however will have sought the more sensible option of venture capital to not only tide them over, but to give them an added boost in the right direction.

Venture capital is funding offered by individuals such as business angels, groups of such individuals who form networks, or venture capital firms who invest money that has been entrusted with them. In exchange for an agreed share in a company those offering the venture capital will invest sums of money, usually in start-ups and small businesses that are destined for rapid growth and an eventual floatation or sale of the company. Such an arrangement can make everyone very wealthy indeed. Those offering the venture capital will multiply their investment and those running the business will gain the injection of capital they require for their enterprise to reach its true potential.

Venture capital is nothing new, it has been around for as long as there have been wealthy individuals prepared to risk their own cash on a business that they have been convinced has great prospects. For venture capital to be one of the only ways of a business funding its survival, now that’s something new.

Of course there is nothing wrong with small business owners adding more of their own savings to keep them moving forward. For one thing it means that the entrepreneurs retain 100 per cent ownership. But venture capital allows these entrepreneurs to keep their safety net savings whilst giving away only a manageable percentage of their business. It can offer possibly a larger sum than the entrepreneurs could have mustered themselves, and there is always the potential that the venture capital could be accompanied by some invaluable business expertise from the investor.

So whilst, some investors are simply interested in offering their money, others may look to add that little extra push in the right direction to a willing new partner, and will provide their time and business acumen.

2009 is the year that several major global economic powers have announced the official end to their recessions, and while such fortune has yet to wash upon British shores economic indicators suggest that we may not need to wait long before similar announcements will come from our powers that be. When this time comes will our banking institutions finally unbolt their vault doors and become worthy of the tax-payer’s continued investment and re-investment in them over the last few years? Alternatively, will it continue to fall on the shoulders of those offering venture capital to fund the small companies of this nation?

More Reading: Is now a good time to start a business? – IOD Blog

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