ABSTRACT. The results of an explorative study on the
financing of 18 high technology Belgian startups are reported.
On a counts basis, the most important sources of financing at
the startup are the entrepreneurs and the banks, but the sources
that provide the largest amounts of funds are the venture
capital companies and private investors. Private investors and
venture capitalists have a complementary role, with the former
investing mostly at the startup and the latter financing the early
growth. The role of the government, universities and other
companies is limited.
Innovative and high technology companies are
considered to be the driving force behind the
future growth of any economy (Bhide, 1994).
Starting and growing a new business, however,
consumes a considerable volume of financial
resources. Besides the normal financial require-
ments that any new company faces, a high tech
company needs additional money for its R&D in
order to develop new products and markets. Lack
of financial resources is one of the major problems
which these companies face (Moore, 1994). In the
U.S., one of the important sources of money for
these companies is the venture capital industry.
In Europe, however, the venture capital industry
is less likely to fund high technology companies
than in the U.S.; there is even an aversion for these
risky investments (Murray and Lott, 1994).
Besides venture capital, a variety of other
sources of finance are potentially available to the
startup company (Timmons et al., 1985). These
include in the first place the personal savings of
the entrepreneurs themselves, occasionally sup-
plemented with capital or loans from family or
friends. Bank financing is limited to loans in
Belgium, but is likely to be more important than
in the U.S. Indeed, several banks have set up
lending schemes targeted at startup companies in
the eighties. They were recognised as being impor-
tant future clients, that had to be tied to a bank
very early in their life.
Private individuals unrelated to the entrepre-
neurs, the so-called business angels, are important
providers of money in the U.S., the U.K., Canada
and Scandinavia (e.g. Freear en Wetzel, 1990;
Landström and Olofsson, 1996; Mason en
Harrison, 1993; Riding and Short, 1987). No study
on their activity exists in Belgium, although some
newspaper reports signal their existence. We
therefore recognise that they may be important,
but at this point, we are unable to assess their role
in funding Belgian new technology based com-
Other non-financial companies may also
provide financial means for startups (Siegel,
Siegel and MacMillan, 1988). It is not uncommon
to see the parent company, where the technology
was developed, but not commercialised, take a
stake in the startup. Other companies may wish
to invest in order to get a “window on the tech-
nology” (Siegel e.a., 1988) or to control an
important customer or supplier (Segers, 1993).
The potential benefits of this type of financing
source are both financial and strategic for the
startup company: it has access to technical and
industry experience, to marketing resources and to
management expertise (McNally, 1994).
Institutional investors, such as insurance com-
panies and pension funds, face heavy regulatory
requirements and are therefore not willing or not
allowed to invest directly in risky startups; they
sometimes invest indirectly through venture
capital funds. Universities may play a role when
Financing High Technology Startups
In Belgium: An Explorative Study
Small Business Economics 9: 125–135, 1997.
1997 Kluwer Academic Publishers. Printed in the Netherlands.
Final version accepted on November 13, 1996
Faculty of Economic and Applied Economic Sciences
and De Vlerick School of Management
University of Ghent