Financial Patterns Affecting the Development Process of Independent Technology Based Companies

Abstract

The aim of this work is to focus on the financial problems affecting a technology based company in its settlement and early development. The study is based on both literature review and field work. Referring to the field work, independent technology based companies which developed new application for the car industry are considered in the study. This hitech companies group is located in UK. At the beginning of the paper some theoretical models which explain the life cycle of a technology based company are introduced and consequently used to explain the specific stages of the business life cycle. The low involvment of the financial network in the early stages of the life cycle of a technology based company is a key problem. The major reasons are: the low level of institutional quality; the sensitive relationship between the entrepreneur and the financial institution executives. The equity market is not present during the early development when the company needs to raise money to support its manufacturing and marketing activities. The result is either the death or the slow down of the companies development process. In the loan market the earning structure of the debt finance is probably the main reason of the low commitment of financial institutions.

Keywords: Independent Technology Based Companies Financing, Venture capital, Entrepreneurship

JEL Classification: G21, G24, G32, M13, 032