The Influence of Venture Capital on Financial Management of Small and Medium Enterprises in Kenya

Venture capital has impacted significantly on financial management of Small and Medium Enterprises (SMEs) in developed countries. SMEs that have accessed venture capital in developed countries have reported improved financial management. Lack of finance and poor financial management has been cited as major contributors to SMEs failure in many developing counties including Kenya. The overall objective of this study was thus to establish the influence of venture capital on financial management of SMEs in Kenya. The study employed a case study method and simple random sampling technique was used to determine the sample size. A sample of 100 SMEs that have been financed by venture capitalist in the major towns of Kenya was used. Data was collected through semi structured questionnaire. Data analysis was carried out using descriptive statistics like the measures of central tendency and frequency tables were extracted with the help of computer software (SPSS and Excel). The findings in this study revealed that venture capital influences financial management of SMEs. Before use of venture capital, budget preparations were 1.5%, debt collection was below average (46%) and only 6% of the businesses maintained inventory control. Upon use of venture capital 96.9% of the firms practice budget preparation, 97% of the respondents was satisfied with debt collection and inventory control was confirmed present by 86% of the respondents. SMEs in Kenya should thus be encouraged to utilize venture capital not only as a source of finance but also to reap benefits of improving their financial management