Research project
Equity Finance Provision in the UK and Regions and the Impact of the Pandemic: An Analysis of Trends in Venture Capital Investments and a Survey of Equity Funded Firms
- Start date: 1 December 2020
- End date: 31 March 2021
- Principal investigator: Professor Nick Wilson
- Co-investigators: Dr Marek Kacer
Description
The growth of innovative companies is often constrained by a lack of financing capability, but such firms are an important source of new jobs, disruptive innovation, regional regeneration, growth and future prosperity.
Such firms require stages of funding from start-up through development and commercialisation; venture capital is a specialist form of finance designed to meet the needs of emergent and growing firms and private equity focuses on transforming established firms onto a growth path.
COVID-19 represents a significant external shock to the global economy and economic activity. For investors, uncertainty about the future of the pandemic and its economic impacts hinders their ability to evaluate and make investment decisions. For many firms, the pandemic has dramatically and unexpectedly depressed or halted sales revenue. Cash flow, profits, operational and capital investment and employment have been significantly affected.
The current crisis is likely to have adversely affected the supply of debt and equity finance for all firms but disproportionately for young, small and innovative companies. This particular sector can often experience ‘funding gaps,’ where credit markets fail to supply sufficient finance to fulfil demand, even in more buoyant times. The post-pandemic recovery period presents further challenges for business finance as firms will seek finance both for growth, working capital and to rebuild cash reserves.
Research overview
This research will focus on a subset of the UK corporate and SME sector, equity-financed or venture capital backed firms in order to gauge the effects of the pandemic on the vibrancy of the equity finance ‘eco-system’. Specifically, we aim to analyse trends in the provision of equity finance in the UK and regions, for new and early-stage ventures, up to and during the COVID crisis, and the performance, experiences and prospects of equity funded firms during the pandemic.
The research will be conducted in consultation with government and practitioners.The analysis will be used to inform policy on interventions that stimulate the supply of finance and to understand the demand for finance at stages of enterprise development. The data and analysis will inform regional policy aimed at addressing regional imbalances in the provision of entrepreneurial finance and the path to economic recovery.
Publications and outputs
This work was supported with funding from Research England QR-SPF (01/12/20 – 31/03/21).
