Startup businesses benefited from increased investment from private equity firms in 2003, according to a new report.
The British Venture Capital Association’s (BVCA) research found that 427 new businesses were financed using private equity, up from 398 firms in 2002.
A total of £263 million was invested in startup firms last year, representing seven per cent of all funds used to launch new ventures in 2003.
The amount pumped into the technology sector increased by a massive 50 per cent during last year, while biotechnology firms enjoyed a 45 per cent rise in private equity funding.
The BVCA study found that net returns raised by private equity now stands at 14 per cent over 10 years, 10 per cent over five years and two per cent over three years.
The improvement in the global economy has seen investment levels pick up after a sluggish couple of years. Although startup failure rates still remain relatively high, sky-high business optimism has seemingly persuaded greater numbers of investors to part with their cash.
The willingness of private equity providers to get involved with new businesses is good news for entrepreneurs, who have repeatedly complained about the service they receive from their banks – the traditional source of startup funds.
Research has shown that although small firms are frustrated with the poor service and fees charged by their banks, many are unaware of other sources of funding, such as venture capitalists.
John Mackie, chief executive of BVCA, said that the figures show that the UK private equity and venture capital industry continues to perform robustly.
“As an industry we invest in all sectors of the economy across every region of the country.
“These reports show once again that the industry is one of the major driving forces of the UK economy. As an asset class we outperform all comparable asset classes over the medium to long term,” he said.
