Starting up and Growing New Businesses
Edited by Bart Clarysse, Juan Roure and Tom Schamp
12. Through a glass darkly: new perspectives on the equity gap Gordon Murray and Dimo Dimov 1. SEED CAPITAL: WHERE ARE WE AT? It has been represented to us that great diﬃculty is experienced by the smaller and medium sized businesses in raising the capital which they may from time to time require, even when the security is perfectly sound. 1.1 Plus Ça Change But many small businesses with high growth potential still ﬁnd it diﬃcult to access the risk capital, and particularly the equity they need to fulﬁl their ambitions. These lost opportunities represent both an economic cost through reduced productivity growth and job creation, and a social cost to the communities within which they trade. The two above statements could be successive paragraphs in a contemporary report on the state of ﬁnancing of small and medium-sized enterprises (SMEs) in 2004. But there is one diﬀerence – 72 years! The ﬁrst quotation comes from the former British Prime Minister, Harold Macmillan, reporting the results of a government committee charged to look at the parlous state of ﬁnances for smaller businesses in the United Kingdom post the Great Depression of the 1930s. This 1931 report is still remembered for its coining of the ever-green term – ‘the equity gap’ – to describe the wholesale unattractiveness of small ﬁrms to investors regardless of the underlying quality of the enterprise. The second statement is from a would-be UK prime minister, Gordon Brown, writing an introduction as the Chancellor of the Exchequer...
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