Venture Capital Financing of Enterprises in Croatia

The aim of this paper is to explore the financing of small businesses in the early stages of their development given that the method and even the possibility of funding in seed, startup and early expansion stage are crucial for the realization of entrepreneurial ideas. Given the level of risk in these phases of the development of small businesses, entrepreneurs are faced with a small number of financing options that involve mainly their own resources and formal and informal venture capital (VC) funds. If it is assumed that development stems from new and innovative products, which are often just launched by startups and SMEs, then this method of financing is an important engine for the development of each country. The conclusions have been drawn on the basis of data collected through the survey of startup market in Croatia, through personal interviews with business angels and companies that have received money from the VC funds, as well as on the basis of their internal financial reports. In Croatia, the venture capital market is still underdeveloped with the small number of projects financed by venture capital funds as evidence, mostly because of low levels of capital, slow systems, poor ecosystem for entrepreneurship development, lack of successful and professional people who become investors and lack of real VC funds that will continue to invest in further stages after the initial minor business angel’s funding. The projects, in their early seed or startup stage can only rely on the business angels as part of the informal venture capital market, while the formal one is mainly directed towards the less risky investments or public capital investments for reconstruction and development of some already present companies on the market.