On 4-11 February 2013 the Lithuanian Private Equity and Venture Capital Association (LT VCA) and the law offices COBALT carried out a survey on the attitude of Lithuanian businesses towards external financing. 102 respondents, managers of Lithuanian enterprises, were asked to identify their needs for external financing, the type and possible sources of investment. The survey was also designed to measure the scope and hypothetical reasons for using or avoiding to use venture capital financing.
The survey encompassed managers / owners (68%) and deputy directors (32%) of businesses acting in the fields of industry (60%), services (27%), and sales (13%). The annual turnover of more than a third (36%) of the respondents reaches EUR 5.8 million, the turnover of one third of the companies is EUR 14.5 million per year, the turnover of 17% of the respondents is EUR 14.5 million, with the turnover of the remaining businesses not exceeding EUR 3 million.
’This survey revealed that more than twice of businesses consider their development prospects are positive if compared to those perceiving their potential negative (39% and 17% respectively). It is important to emphasise that almost half of the companies plan the development of their activity. Having in mind current economic situation, this rate is quite high,’ – emphasised Mr Šarūnas Šiugžda, President of the Lithuanian Private Equity and Venture Capital Association.
Half of the companies (46%) would use external financing for development and working capital. If companies were asked to choose financing instruments, they would prefer their own funds and credit facilities, as well EU funds or state aid and leasing. Financing from friends/family and venture capital funds would be chosen less frequently. Only a third of the companies believe that it is easy to obtain external financing; the remaining part of businesses (67%) face financing problems.
According to Mr Šiugžda, these data demonstrate obvious need for venture capital investment in Lithuania as companies which plan their development are facing a financing gap.
Slightly more than a third of respondents (36%) were unable to state if their companies are suitable for venture capital investment. Only 17% of those surveyed indicated that their businesses could be chosen for venture capital investment, meanwhile a quarter of the respondents (24%) believe that their companies are not suitable for this kind of investment. This demonstrates a lack of awareness of and information on venture capital investments. If compared to a similar survey carried out in 2013, the level of awareness of venture capital funds has notably increased (from 2-3% to 8-9%).
’The fact the majority of companies are unable to perceive if they are suitable for venture capital investment shows that it is necessary to raise awareness of venture capital funds and investment criteria. It is important to highlight that companies that are already familiar with investment funds would choose venture capital financing not only due to the need for funds as such but also in an attempt to satisfy their needs for a reliable and experienced business partner,’ claims Mr Šiugžda.