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INSTITUTIONAL FRAMEWORK AND SME ACCESS TO FINANCE PROF. DR. SOPHIE MANIGART VLERICK BUSINESS SCHOOL AND GHENT UNIVERSITY.

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Presentation on theme: "INSTITUTIONAL FRAMEWORK AND SME ACCESS TO FINANCE PROF. DR. SOPHIE MANIGART VLERICK BUSINESS SCHOOL AND GHENT UNIVERSITY."— Presentation transcript:

1 INSTITUTIONAL FRAMEWORK AND SME ACCESS TO FINANCE PROF. DR. SOPHIE MANIGART VLERICK BUSINESS SCHOOL AND GHENT UNIVERSITY

2 FUNDING GROWTH IS CRUCIAL FOR THE SUCCESS OF COMPANIES 2 Development Stage Source: EY; Frontier Economics; EVCA

3 © Vlerick Business School

4 MOST ACTIVE CROWDFUNDING CATEGORIES

5 © Vlerick Business School FUNDS PAID OUT PER EQUITY BASED PROJECT

6 FUNDING GROWTH IS CRUCIAL FOR THE SUCCESS OF COMPANIES 2 Development Stage Source: EY; Frontier Economics; EVCA

7 © Vlerick Business School

8 THE VENTURE FUNDING LANDSCAPE IN THE US COUNTS MANY DIFFERENT PLAYERS IN ALL STAGES

9 © Vlerick Business School US COMPANIES RAISE MORE VC FUNDING US EU First round$ 7 mio€ 3,2 mio Cumulative VC amount$21 mio€10,4 mio

10 © Vlerick Business School THIS LEADS TO HIGHER GROWTH IN US COMPANIES

11 © Vlerick Business School VC IN EUROPE IS THREATENED  Banks: Basel III regulation  Insurance companies: Solvency II regulation  National/regional public policy focuses on small funds, but big money is needed  Public policy invested 30%-40% of new money in european VC funds between

12 © Vlerick Business School BELGIUM SCORES LOW ON BROAD INSTITUTIONAL FACTORS Source: Groh, Liechtenstein, Lieser, (Stock market, M&A) Quality of education

13 © Vlerick Business School A STRONG INSTITUTIONAL FRAMEWORK LEADS TO MORE SME FINANCING SUPPLY OF FUNDING  Legality index  Effectiveness of legal system, absence of corruption, risk of contract repudiation,…  Self-dealing protection  Legal protection of minority shareholders  Creditor rights protection DEMAND FOR FUNDING  One-share-one-vote  Bankruptcy regulation and execution  Discharge available?  Bankruptcy process costs? Duration?

14 © Vlerick Business School LEGAL FRAMEWORK AND SME FINANCING IN EUROPE MORE EQUITY RAISED IF…  Stronger legality index (+22%)  Better protection against self-dealing (+79%) MORE DEBT RAISED IF…  Stronger legality index (+13%)  Stronger creditor rights (+12%)  Discharge after bankruptcy (+79%)  Quicker bankruptcy closing, lower closing costs

15 © Vlerick Business School POSITION OF BELGIUM COMPARED TO UK

16 © Vlerick Business School CONCLUSION  Improving the legal (and, more broadly, the institutional) environment for  Minority shareholders  Creditors  Entrepreneurs would strongly enhance the availability of funding for SMEs  …at low cost for public policy!

17 © Vlerick Business School FUNDING


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