Impact of Venture Capital Finance on Small and Medium Scale Enterprises in Nigeria

Abstract

This study examined the effect of venture capital investment on SMEs in Ekiti State. The study employed small and medium-sized firms as the dependent variable and long-term investors, investment banks, and financial institutions as the independent factors.    Using a stratified sample technique, a well-structured questionnaire, descriptive statistics, and ordinary least squares estimate as method of analysis, the study indicated that long-term investors greatly affect SMEs' performance. This defies the null hypothesis. The regression study revealed a favourable correlation between long-term investment and SME success (coefficient = 0.537, p-value = 0.000, p < 0.05).  The second hypothesis was rejected since investment banks positively affect SME financial viability. The regression coefficient of 0.817 and p-value of 0.000 indicate a substantial influence. Investment banks may assist SMEs improve their finances by providing structured financial products, consultation, and corporate rearrangement. The statistical data also rejected the third hypothesis by showing that financial institutions substantially and favourably enhance stakeholder and investor trust in SMEs. The research shows that external stakeholders trust and believe SMEs sponsored by reputable financial institutions (r=0.822, p=0.000). The research concluded that long-term investors, investment banks, and other financial institutions, improve performance, sustainability, and credibility for Nigerian SMEs. These venture capital investment sources provide small and medium firms the financial, managerial, strategic, and reputational support they need to succeed. Thus, Nigerian SMEs can maximise venture capital financing by upgrading their goods, expanding operations, and investing in technology.  SMEs should also teach managers and owners on venture capital fund management regularly. This includes accurate record-keeping, quick risk assessment, and financial compliance. SMEs receiving venture capital must be transparent and accountable. This may be achieved by doing business responsibly, keeping thorough financial records, and reporting to investors honestly.