VENTURE CAPITAL FINANCING AND THE PERFORMANCE OF SMALL AND MEDIUM-SCALE ENTERPRISES (SMES) IN SOUTH-WEST NIGERIA: IMPLICATIONS FOR ECONOMIC RECOVERY AND SUSTAINABILITY.

Abstract

One of the prominent challenges facing Small and Medium-scale Enterprises (SMEs) in Sub-Saharan Africa is poor access to finance, which have resulted into an overall poor performance. Venture Capital (VC) financing effects’ on SMEs performance in South-West Nigeria was assessed in this study. Descriptive method of research design was adopted, tools designed based on the research questions and objectives with Reliability Cronbach’s Alpha = 0.91, Test-Retest (0.85 & 0.91), Validity coefficient = 0.67. Quantitative data sourced among 372 participants were analyzed using SPSS 25.0 while qualitative data collected from 6 Key Informant Interview and In-Depth Interview among 25 purposively selected VC firms were subjected to thematic analysis using Atlas.t software. Out of a sample size of 372 SMEs, 145 (39%) were VC financed while 227 (61%) were Non-VC-financed. The study hypothesis was tested using Multiple Regressions Analysis. Venture Capital financing strategies (Growth, Prudent financial management, Improved management style and Attraction of other financiers) jointly predicted the performance of SMEs[R =.441, R²=.194, F(4, 141) = 8.430; p<.001]; SMEs performance and VC0financing of SMEs at (r = 0.64; p<.01); VC financing model confirmed a good fit for predicting SMEs performance in South-West Nigeria with implications for economic recovery and sustainability.  Creation of an enabling environment for VC firms by enacting investment friendly laws, incentives and policies that encourage financial institutions like banks, pension and insurance fund’s contributions to the pull of funds for VC investment recommended.