An Evaluation of the Determinants of Venture Capital Financing of Small and Medium Scale Enterprises in Nigeria

Apollos Ajevata Emerah and Stephen Oloruntoba Oyedele
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Apollos Ajevata Emerah: Edwin Clark University, Kiagbodo Delta State, Nigeria
Stephen Oloruntoba Oyedele: Nigerian Army University, Biu Borno State, Nigeria.

International Journal of Research and Innovation in Social Science, 2023, vol. 7, issue 7, 1261-1269

Abstract: This study investigated the determinants of venture capital firms’ decision to finance small and medium scale enterprises in Nigeria. The basic objectives were to identify and analyse the factors that determine venture capital financing of small and medium scale enterprises in Nigeria.It was hypothesized that there was no significant factor that determined venture capital financing of SMEs. The population of study comprised 7474 SMEs in southwestern Nigeria that registered with Corporate Affairs Commission. Purposive sampling was used to choose two states, namely Lagos and Oyo that had the largest percentage (79.3%) of registered SMEs in Southwestern Nigeria. Slovin’s formula was used to select 374 SMEs in the states using population proportionate to size.The findings of the investigation showed that Profit, growth potential, Corporate Governance, Government Policies and Business Plan were the significant factors that determined venture capital financing of small and medium scale enterprises in southwestern Nigeria. It was recommended that SMEs should acquaint themselves with the factors that determine venture capital firms’ financing and provide the necessary business environment that will attract equity finance from venture capital firms. Equally, venture capital firms were advised to shift emphasis from profit making to long term goals like business size, investor protection and entrepreneurial experience which will ensure the survival of SMEs and benefit all stakeholders.

Date: 2023
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