Policy lessons from financing innovative firms
There has been increasing concern from policy makers around the world about the lack of access to finance for young innovative firms. As a result, governments in many OECD countries have sought to address the financing gap and perceived market failures by supporting the seed and early stage market.
This paper seeks to summarise the lessons learned in seed and early stage finance based on OECD work over the past several years focused on policies related to financing high growth firms, including angel investment and venture capital.
Young innovative firms face many difficulties accessing seed and early stage finance and these have increased over the past years. Banks have been less willing to provide loans to start-ups as a result of the financial crisis. Meanwhile venture capital firms have become more risk adverse due to pressures on the industry and have focused on later stage investments. Angel investors have become more visible and active through groups, syndicates and networks but also face challenges.