The problem of capital attraction into venture capital funds of Latvia

Abstract

The paper deals with the problems of capital attraction into venture capital funds of Latvia. In the post-crisis period, investor concern towards risks worsened. The attitude of banks to venture projects became more cautious as well. Therefore, it has become increasingly important to identify causes and factors that hinder the attraction of venture capital into venture capital funds and, consequently, potential portfolio companies. A questionnaire survey of venture capitalists was conducted in Latvia in the frames of this research. The paper analyses the causes that, according to the venture capitalists, negatively affected the attraction of venture capital into venture capital funds; the factors that did not negatively affect the attraction of investors were also examined. In addition to the questionnaire survey, the logical and constructive methods and comparative analysis were employed in the research. As a result, basic factors that obstruct the attraction of investors into venture capital funds were identified. Among the key problems of capital attraction into the venture industry of Latvia are: insufficient activity of Latvian institutional investors, insufficient investor confidence in venture capitalists, their performance and experience, and the negative investor referring towards investments after the crisis.