City analysts rather than a shortage of funds have been blamed for the failure of many start-up companies to develop beyond the seedling stage.
Professor Alan Hughes, director of the Centre for Business Research at Cambridge University, who has made a five-year study funded by the Economic and Social Sciences Research Council, says 92% of 600 firms sampled got the finance they asked for.
The larger a firm, the more likely it was to obtain finance, said Hughes, in a speech at a Department of Trade and Industry seminar marking Science, Engineering and Technology week.
Financiers did not differentiate between innovation and established technology, with firms that had developed a product or process technology within the past three years receiving the same levels of City backing as those which had adopted existing so-called diffusion technology.
Roger Young, director of the Institute of Management, said analysts did not understand leading edge technology. `When we get in front of these so-called analysts they haven’t got a clue about technology. It does worry me that British innovation is being financed by the US, Dutch and Germans.’
Dr Peter Harrop, chairman of Pinacl, a private company specialising in fibre optic networks, recalled the `mind boggling ignorance and arrogance’ of a panel of analysts who advised it to concentrate on developing software products because the City did not like hardware.
Alcon Copisarow, senior adviser with consultant Ernst & Young, said most venture capital companies did not get involved with start-up firms because `preliminary work on the market and supply chain had not been done’.