Early stage financing of NTBFs: An analysis of contributions from support actors

Abstract

This paper is based on a survey of 150 firms about the main problems faced in the early stages by NTBFs with different roots, and the contributions of different actors in the early development of technology-based firms. In the analysis the different generic problems of the young firms are put in relation to contributions not only in terms of finance but also in terms of their support in finding the market niche and developing an early product concept into market-viable applications. Our analysis shows that firms in the technology forefront experience greater problems in fundraising as compared to firms of lesser technological sophistication. The same holds for high-growth firms as opposed to low-growth firms. The typical high growth firm operates in an environment characterized by new technology and an emerging market. This implies extreme levels of uncertainty and may explain the greater difficulties these firms experience in financing, especially in the early stages of development. Moreover, firms with the highest levels of technology more often originate from university or research related environments than firms with less novel technology. The analysis also shows that in all (problem) dimensions, business angels are considered to be the most important actor group by the firms in the study. It also turns out that the most growth-oriented firms are the ones most favoured by business angels and venture capital.