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Who Funds Technology-Based Small Firms? Evidence from Belgium

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  • ANT Bozkaya
  • Bruno Van Pottelsberghe

Abstract

Using an original survey sample of 103 unquoted Belgian technology-based small firms (TBSFs), we examine the capital structure of start-up companies during their consecutive development stages. We find that internal funds, either alone as personal savings or in combination with family and friends, to be the primary source of financing. Personal funds of the founders are used to finance the start of 82 percent of TBSFs. Commercial bank and government funds are the most important sources of external finance for TBSFs subsequent to start-up. Most founders agreed that business angels and venture capitalists play a greater role at later stages. However, once granted, more substantial amounts of funding come from venture capitalists. There is also evidence that suggests an evolution in the mix of internal and external sources of finance. Finally, our findings based on founders’ scores in raising external funds suggest a call for urgent policy action to improve access to and availability of early-stage entrepreneurial finance in Belgium. We discuss our findings in light of the capital structure of small firms relating to TBSFs.

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Bibliographic Info

Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 04-027.RS.

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Length: 14 p.
Date of creation: 2004
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Handle: RePEc:sol:wpaper:04-027

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Keywords: capital and ownership structure; entrepreneurial finance; technology-based firms; seed capital; survey.;

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Cited by:
  1. Michael Peneder, 2009. "The impact of venture capital on innovation behaviour and firm growth," Venture Capital, Taylor & Francis Journals, vol. 12(2), pages 83-107, November.
  2. Susan Coleman & Alicia M. Robb, 2011. "Financing Strategies of New Technology-based Firms," Review of Economics & Finance, Better Advances Press, Canada, vol. 1, pages 01-18, August.
  3. Antonelli, Cristiano & Teubal, Morris, 2008. "Venture Capital as a Mechanism for Knowledge Governance: New Markets and Innovation-Led Economic Growth," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 200805, University of Turin.
  4. Brown, Martin & Degryse, Hans & Höwer, Daniel & Penas, María Fabiana, 2012. "How do banks screen innovative firms? Evidence from start-up panel data," ZEW Discussion Papers 12-032, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  5. Hoewer, Daniel & Schmidt, Tobias & Sofka, Wolfgang, 2011. "An information economics perspective on main bank relationships and firm R&D," ZEW Discussion Papers 11-055, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  6. Joël Ludvigsen, 2009. "Decision time in Belgium: an experiment as to how business angels evaluate investment opportunities," Working Papers CEB 09-037.RS, ULB -- Universite Libre de Bruxelles.

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