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The Impact of the Financial Crisis on the Financing and Growth of Young and Established Technology-Based Small Firms in the United Kingdom in New Technology-Based Firms in the New Millennium book seriesThis paper presents the findings of some recent UK research to assess the impact of the recent financial crisis on Technology-Based Small Firms (TBSFs). It reports on findings from an extended telephone survey with the owner-managers of 49 young and 51 more mature TBSFs, undertaken in 2010. It has commonly been thought that TBSFs face greater obstacles in accessing finance, than conventional SMEs. Even before the onset of the global financial crisis in 2007, research evidence indicated that the growth and development of TBSFs in the UK was hindered by a shortage of external finance. This is because banks have difficulty assessing the viability of new high technology business ventures due to information asymmetries, whilst other financiers such as venture capitalists and business angels may be unable to provide appropriate and sufficient funds on terms that are acceptable to entrepreneurs. It is therefore argued that the development of TBSFs is adversely affected by market failures and the existence of a finance gap, particularly affecting new and early stage TBSFs. Given the difficulties that SMEs in general have faced in obtaining external finance in recent years, it seems reasonable to expect that TBSFs have been particularly adversely affected by the financial crisis. Our research demonstrates that TBSFs exhibited a relatively strong demand for external finance over the 2007-2010 period, seeking finance mainly from banks, but also with younger TBSFs seeking business angel finance and innovation grants and more mature TBSFs seeking venture capital finance. The evidence is that both debt and equity finance became harder to access for TBSFs, particularly for early stage funding and for more R&D intensive firms. Moreover, where funding was offered, it was often insufficient or on unacceptable terms. The paper provides further evidence of a growing funding gap and concludes that the ability of TBSFs to respond to the economic recovery is being hampered by ongoing problems in obtaining the external finance needed for business growth.