Strategy and Finance in Small High-Technology Companies

Abstract

This study started as a general investigation of the business strategies of a number of high-technology firms around Cambridge.¹ Our first round of interviews suggested that one of the areas which deserved further study was the inter-relationship between the strategies adopted by firms and their financing problems. Most of the companies needed outside finance to expand, but their attitudes towards the bodies which might provide it were ambivalent. The typical high-technology entrepreneur starts his business with a relatively small amount of money, very often raised by remortgaging his house. He then needs additional capital either in the forms of loans or equity, but is anxious that in raising this money (which is likely to be several times greater than his own resources) he should not lose control of the destiny of the company. He needs to obtain additional capital, but is wary of the consequences of accepting it. The terms on which capital is available, from the banks, venture capital funds and other financial institutions, thus have an important bearing on the type of strategy followed.