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10 May, 2012 - 23:01 By News Desk

VCs face crisis of trust

Andrew Haigh

UK entrepreneurs deeply mistrust Venture Capitalists, it emerged in a report launched in Cambridge last night.

The damning survey was unveiled by wealth management and private banking specialist Coutts at its Cambridge UK office.

Most UK entrepreneurs believe VCs fail to understand entrepreneurship. They are also largely sceptical about the benefits of venture capital and its fit with the entrepreneurial mindset.

While 69 per cent of entrepreneurs believe venture capital investment will deliver faster growth to a business, the majority have doubts about the experience they would go through and the sustainability of that growth.

But Coutts’ Cambridge executives urge businesses to use the survey findings to build bridges with VCs rather than burn them.

Entrepreneurs’ perceptions of venture capital illustrated in the research show that:-

• 72 per cent do not believe VC is the best way for a business to realise its growth prospects

• Only 19 per cent believe venture capital delivers sustainable growth

• 24 per cent believe VC investment increases the risk of business failure

• Only 37 per cent believe venture capital investors are interested in or understand entrepreneurs

• Perhaps most damningly of all – only 22 per cent of entrepreneurs believe VC investors have a good reputation

Yet the research also found that among those who said they had worked with venture capital, 74 per cent admitted to a good relationship with their investors and only 13 per cent said they regretted the decision to take the investment.

Those with experience of venture capital are twice as likely to select VC as their preferred source of business finance compared to those with no experience.

Andrew Haigh, Coutts’ executive director, client propositions, said: “There is no doubt that entrepreneurs see venture capital as an important source of finance and associate it with increased growth in their businesses.

“What our research shows, however, is that when it comes to considering this source of finance, negative perceptions around the nature of venture capital and how to work effectively with these investors – which don’t reflect the true experience of those who have done this – are likely to cloud the judgement of entrepreneurs and get in the way of approaching venture capital with a mindset which will deliver a successful deal.

“There is clearly an opportunity for more entrepreneurs to look again at this source of finance, which could unlock future growth in their business.”

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