(Venture Capital versus Bank Financing in the Finance of Entrepreneurship: The Case of METU Technopark)

Abstract

Purpose – Today one of the most significant obstruction in front of entrepreneurship is the finance related problems. In addition to classical sources of finance such as bank credit financing, public and financial sectors are developing alternative sources of financing to eliminate this problem. Considering that the entrepreneurs of today are making technology-based initiatives, venture capital stands out as an important and powerful alternative. In this context the objective of the study is to compare the venture capital and bank finance usage of the firms located in the first technopark of Turkey, namely METU (Middle East Technical University) Technopark and to determine the factors that affect the usage of these two sources of finance. Design/methodology/approach – In line with the aforementioned objective survey method is utilized in the study. In this context survey is delivered to 281 firms of 376 operating in METU Technopark. Out of this 281 firms, 114 have accepted to participate in the survey. For the analysis of the data obtained through survey method SPSS and STATA software are utilized and descriptive statistics and Probit analysis are made. Findings – According to the findings of the research 58.8% of the firms use bank finance while 16.7% use venture capital. According to the results of the Probit analysis, the gender, age, trainings of entrepreneurship received and the level of bank finance knowledge of the entrepreneurs who have participated in the survey affect bank finance. On the other hand business experience, existence of an independent finance department at workplace and the level of both bank finance and venture capital knowledge affect the probability of using venture capital. Discussion – The literature on bank finance and venture capital and the results of the study reveal that bank finance as a source of financing is still in great demand for the entrepreneurs. However the findings assert that venture capital has a substantial potential for entrepreneurs.