Venture capital is a relatively new, but growing, form of financing that goes beyond prevailing practices in the banking system of Greece and neighboring countries. A number of factors are leading to an increase in demand for venture capital:

High interest rates: Average interest rates are more than 4-5 percentage points above the inflation rate, a spread lower than in the past but still significant in an intensively competitive economy.

High management costs of loans.

Strict collateral requirements by Banks for providing loan capital are a serious impediment, particularly to developing and small to medium-sized enterprises lacking fixed assets.

Limited available bank capital due to coverage of fiscal needs and deficits, use of large capital sums for major projects, etc.

Companies/ need to share risk.

Effective contribution of venture capital funds to their portfolio companies due to substantive participation in management; significant added value of a strategic investor (such as a VC fund), particularly in firms aspiring to go public.

VC funding –as opposed to debt financing- allows companies much better control of their leverage (debt/equity ratio). It allows them to invest in development and modernization without increasing financing risk due to excessive borrowing.