Liquidity Constraints upon Start-ups with New Products: a Study of Reasons for Failing to Access Finance using GEM UK Data

The possibility of differing reasons for finding finance between innovative and noninnovative start-ups is examined using data from the Global Entrepreneurship Monitor (GEM) for the UK. A sample of 140 start-ups who reported they had problems in accessing one or more sources of funding was subdivided into start-ups intending to produce new products, and those producing established products. The sources of finance used by, and refused access to, by these groups of start-ups were examined, along with the reasons for failing to access sources of funding. It appears that those attempting to provide a new good or service often rush in without full preparation, more often suggesting that the reason for failing to access finance was due to not being investor ready and having inadequacies in the business plan than those intending to sell established products. The implication being that in order to encourage innovation it is necessary for policy makers to ensure that innovative entrepreneurs are provided with the business skills required to ensure that their ideas make it to the market place, rather than being aborted due to a lack of finance.