Simplify and streamline regulations and procedures in existing support programmes.
Regulations and conditions for existing and new enterprise support programmes need to be more transparent and procedures simplified. Bureaucracy should be reduced, decision making accelerated and information made more accessible with respect to enterprise access to funding. An evaluation of the impact of regulations and procedures should be conducted on an annual basis based on feedback from client companies.
Address weaknesses in business plan preparation and business development.
As a contribution to resolving the problem, the banks might consider producing a guide to business applicants or undertaking some work on establishing ‘mentor’ panels and ‘patron’ panels that will guide entrepreneurs while making formal application to banks.
Help firms to assess their own investment readiness.
Programmes should be designed to address a perceived lack of investment readiness in certain sectors by improving the level of knowledge in firms about their own growth and return potentials and methods of financing. Key features would include intensive working with each company; highly interactive workshops based on role play exercises, and delivered by experienced industry experts like accountants, lawyers, business angels, clearing banks, venture capital firms and corporate finance firms and a free diagnostic investment readiness tool. Such programmes enable firms to asses their own investment readiness, obtain feedback on their strengths and weaknesses, their ability to access equity finance, and increase investor interfaces with underinvested sectors.
Review existing venture capital schemes.
The existing schemes of venture capital provision should be reviewed as to their relevance and effectiveness in generating and supporting new companies and growing SMEs. Local agencies should examine, in co-operation with financial institutions, how joint funding initiatives might enable more venture capital to be introduced.
Increase development-oriented financing.
Development-oriented financing initiatives should be extended from venture capital to other financial instruments, e.g. guarantees, and should be offered to all kinds of entrepreneurs, rather than just technology businesses. Extending existing institutions and instruments should be preferred to developing new ones.
Seek the involvement and advice of business angels.
A developed venture capital system needs individual investors as well as venture capital funds. ‘Angels’, that is people who are prepared to invest in individual companies and frequently bring knowledge of the sector or other strategic advice to companies, are common in most OECD countries. They may be people who successfully started a company in the past and may have a series of companies in which they have invested. Often this type of investment is accompanied by mentoring where the individual investor or another nominated person acts as a counsellor to the entrepreneur and business. This is particularly important to businesses that are seeking to penetrate international markets or to firms that have ambitious growth plans.
Develop programmes to boost the numbers of business angels.
The objective of such programmes is to increase the pool of business angel investors and thus boost the supply of equity to small firms. This means recruiting high net worth individuals with relevant business experience and an interest in helping to build, support, mentor and invest in early stage companies with growth potential. Often potential angels are reluctant to get involved partly due to a lack of knowledge about what is entailed and a lack of relationships with existing angel investors. The attraction of “knowledge angels” to pass on relevant processional and business experience to investee companies, without necessarily investing themselves has proved a successful ingredient of such programmes elsewhere. Widespread marketing campaigns can be helpful in increasing a general awareness of and interest for business angels activities.
Continue the financing of business angel networks overhead costs on a minimal level.
It is important to ensure that angel networks receive only just the level of subsidy needed to maintain their operation. For the relatively small amount of money required to run an angel network, the public sector can expect to achieve a very high level of leverage on the investment finance raised. The development of incentives to seek commercial sponsorship from firms engaged in the investment process should be discussed. This could include banks, accountants and lawyers, whose involvement will also strengthen the network, helping to introduce deals and new angel investors.
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