by Real Business - Thursday, 30th August 2007

Doug Richard, of Dragons’ Den fame, wasn’t so sure. His firm Library House collects data on every venture-backed company in the UK. So he investigated, and guess what? Not only is there no equity gap, there’s practically an equity mountain. More deals occur in that space than any other. Even startups get a fair shake: of 848 first-round institutional deals (excluding public sector-backed deals) more than half raised between £250k and £2m.

That might surprise Gordon Brown, who introduced the £200m Enterprise Capital Funds (ECFs) specifically to bridge the equity gap. But if ministers are operating on false assumptions, how many of those pounds are well-spent?

"By focusing on a problem that doesn’t exist, it obscures our attention from the problems that small businesses do face," Richard says. One is a sector gap: semiconductor and biotech firms are more likely to get funds than new media or software companies. Another is the "readiness gap". Richard says investors have the money to spend, but just don’t think the companies who approach them are worth the investment.

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