STRATEGIC DETERMINANTS OF ACCESS TO VENTURE CAPITAL AMONG SMALL AND MEDIUM SIZED ENTERPRISES IN NAIROBI COUNTY
Carol Weru - Master of Business Administration, Jomo Kenyatta University of Agriculture and Technology, Kenya
Dr. Gladys Rotich - Jomo Kenyatta University of Agriculture and Technology, Kenya
ABSTRACT
SMEs contribute considerably to the national GDP and to private sector employment, but they struggle to gain access to the funding needed to support business sustainability and growth. It is generally accepted that there is a high mortality rate of SMEs within the first two years of operation. One of the contributory factors to their failure is lack of funds to run their businesses. Venture capital provides the necessary funding, but SMEs lack understanding of the business value curve utilized by financiers to gauge the risk-reward characteristic of an investment. This study sought to investigate strategic determinants of access to venture capital in small and medium sized enterprises (SMEs) in Nairobi, Kenya. The study employed a descriptive research design and was guided by the following specific objectives; to ascertain how the level of information awareness affect access of venture capital in SMEs, to examine how the firms resources affects the access of venture capital in SMEs, to establish how business proposals developed influence the access of venture capital in SMEs, and to find out how entrepreneurial competence affect access of venture capital in SMEs. The target population of this study was the Finance Managers of all the registered SMEs who make tax returns to KRA in Nairobi County which amounts to 594. The population was grouped into four strata. Stratified random sampling technique was used to select a sample size of 119 respondents. A structured questionnaire was used for data collection. The study generated both qualitative and quantitative data where quantitative data was coded and entered into Statistical Packages for Social Scientists (SPSS Version 17.0) and analyzed using descriptive statistics and regression analysis. Data was presented using frequency tables and figures. The results of the finding indicated that level of information awareness affects access of venture capital financing in their company a great extent. In relation to firm’s resources and its effects on access of venture capital financing of companies, the study found that it has a great effect on access of venture capital financing by SMEs. It was further deduced that business proposal affect access of venture capital financing in the companies to a very great extent. The study finally found out that entrepreneurial competence affect access of venture capital financing in the companies to a very great extent. Based on research findings, the study concludes that level of information awareness, firm’s resources, business proposal and entrepreneurial competence affects access of venture capital financing in the companies. Based on research findings, and conclusions the study recommends the managers of SMEs in Nairobi County should aim at increasing their collateral which are a must factor requirement for them to access venture capital from formal credit facilities. The study recommends that managers of SMEs in Nairobi County should develop different channels for accessing important information such as twitter account, Facebook and Whatsapp application. The study also recommends that managers of SMEs in Nairobi County should attend the trainings on different aspects of firm management in order to improve in their level managerial competency. The study finally recommends that managers of SMEs in Nairobi County should possess a good credit experiences.
