Venture Capital Will Fill The FINANCE GAP in Sri Lanka - Will They?

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 Experts believe that small and medium enterprises will promote economic growth and reduce inequality. Internal cash flows often become insufficient, so MSME IPO requires equity to grow their business and without adequate equity, banks don't provide business loans. 

Sri Lanka has a few private equity firms and earned huge profits, also invested in different small businesses. The country has angel investors as well who invest in the proven business plan. 

The gap between private equity firms and angel investors is filled with venture capital firms. Venture capital firms are specialized in investing in low-line startup Funding that require funds for expanding their business.

Sri Lanka does not have a large market like India and is not a wealthy country like China or Taipei. The country is not involved with its neighbors, so it can't reap the benefits of millions of investments from Central and Eastern European countries. In Sri Lanks, there's a limited scope for approaching investors which indicates that venture capital firms and Mergers And Acquisitions would struggle to find an exit door. 

The second issue arises that SMEs may or may not want to fund but are willing to forfeit the control that venture capital firms are expecting. 

There must be a hybrid solution for the exit of venture capital firms. 

SMEs VC Funding are reluctant to give up control. It is a challenging situation. Forgoing conventional "pure" stock in favor of hybrid forms of capital, particularly subordinated debt and revenue-based instruments, is one potential option.

It's well-known that subordinated debt exists. It is similar to debt in that it has a set timetable for repayment and interest payments, but in the case of a default, its payments come after those of senior lenders.

It's well-known that subordinated debt exists. It is similar to debt in that it has a set timetable for repayment and interest payments, but in the case of a default, its payments come after those of senior lenders.

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