Stuart Watson, partner at Ernst & Young, responds to Science and Technology Select Committee findings on entrepreneurship funding…
“Companies developing new science and technology tend to be either a great success or a great failure and those funding such ventures will need to be prepared to take an equity risk. This is where venture capital investment is extremely important and should be valued and enhanced, rather than discouraged, to develop the UK as a world centre and keep up with its rivals.
“European venture capital deals are at their lowest rate since 2000, according to a recent Ernst Young report (G20 Funding the Future). In comparison, the Chinese venture capital investment grew to USD5.9billion, compared to levels of just USD1.1billion in 2005. India has also seen a five-fold increase in such investment in technology companies in this way to USD1.15billion in this period.
“While attempts to encourage greater lending to start ups is important, it must be recognised that start up technology companies are unpredictable, while banks prefer predictable cash flows.
“It is important to recognise that there are differing stages for technology companies, starting up, emerging or expanding. Each of these raises different and complex funding issues, making this a genuinely interesting and difficult policy area.”
