Investment in small firms on a high in 2007

Despite reports of economic doom and gloom, the amount of money invested in small companies reached a new high in 2007, new figures reveal

Venture Index, which records deals involving small, unquoted UK businesses, said investments totalled £85m in the 12 months to December, a 35% increase on the £63m raised in 2006.

IT and computing software and services firms were the most attractive to sectors, accounting for 23% of overall investments.

The report claimed that with 132 of the year's total 450 deals completed during the last three months of 2007, the credit crunch was having little effect.

But Modwenna Rees-Mogg, managing director of Venture Index, warned that the figures could be the last healthy wave of investment before the impact of the liquidity crisis in credit markets is felt.

"Investors are telling us that it is definitely a buyers market at the moment, which suggests many entrepreneurs may go away from a fundraising empty handed," she said.

"From the middle of this year many of the government backed funds will be ending their investment periods and will not have capital available for fresh deals."

Rees-Mogg added that with venture capital firms 3i and Merlin Biosciences pulling out of investing in early stage companies, entrepreneurs are "waiting to see who might come in, if anyone, to fill the void".

BusinessZONE 23rd April 2008



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