Importance of Venture Capital for SMEs

Our SMEs are the backbone of our national economy. The added value they create, the employment opportunities they provide, and the investments and exports they make are essential. However, SMEs, despite being in such a critical position to our economy, face considerable challenges. The solution to all of these problems basically depends on the elimination of the lack of financing, i.e. lack of access to financial resources.
 SMEs that do not have financing problems are generally able to overcome all their problems. In order to overcome difficulties, they outsource consultancy services or employ experts when necessary.

Of course, the biggest and most intractable problem is access to financing sources. When we examine why entrepreneurs experience financing difficulties or why they utilize bank resources, we see that the problem generally begins at the point of starting the investment. This is because our entrepreneurs usually think that investment is only about building and machinery/equipment when they start investing. They do not think much about the post-investment part, i.e. the working capital part. They think they can somehow secure working capital. However, once the investments are completed and production begins, it becomes apparent that this business cannot be maintained without working capital and a vicious cycle begins. In order to get the business up and running, production is either started with very low capacity, which is not profitable because it does not fit the economic scale of production, or, in order to enter and stay in the market, minimum profit products are sold and this is not enough for the company to accumulate the necessary working capital. As a result of this vicious cycle, after a short period of time, the business either closes or changes hands.
This is where venture capital is particularly important for innovative SMEs. First of all, after the investment of venture capital funds, companies can make great strides in institutionalization by rapidly completing a restructuring process. As a result, the financial structure is strengthened with an improved corporate image. Strengthening the financial structure boosts the confidence of financial institutions, suppliers of goods and materials and customers in the company,

 which in turn allows the company to produce and sell high quality goods or services at competitive prices and, as a result, to grow rapidly and steadily. In addition to financing, venture capital funds play an advisory and guiding role to companies in all kinds of issues. Thanks to their experience, network and business relationships, they help SMEs to solve many problems that they could not deal with alone, or open doors that might have appeared closed before.

This makes a great contribution to the rapid growth of companies and ensures that companies reach the second or third generations with a healthy structure.