It could be argued that in the past investors had a more direct connection and interest in the businesses in which they invested.
They would therefore be willing to be more patient and to wait longer for a return on their investment. Equally they could justify a larger investment by using their knowledge and experience to reduce the risk of losing their investment.
However, as fewer businesses have been involved in making tangible goods for purchase so that the UK’s manufacturing sector has shrunk dramatically and the service sector has grown, so too, investors have become more dissociated from the organisations into which they put their money.
Alongside this, investors have become more impatient to see a profit and shift their money around much more quickly, as demonstrated by returns to hedge funds and justified by some high profile, rapid growth companies.
The high profile, rapid growth investment opportunities are mainly in the technology sector, which can be less predictable but which also requires fewer staff, particularly at middle-management level.
This explains why it is difficult to source finance for disruptive technology or to fund new ideas in UK to find large investors unless they move to California.
Outside friends and family, the main option for SMEs with rapid growth potential to find finance in UK is from crowd funding.
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