Investment appeal and development strategies of small businesses

Abstract

The article presents the results from a study of investment attractiveness of small and medium-sized businesses in the period from 2013 to Q3 2016. It reveals some changes in the mood of business representatives in the period of 2015-2016 due to the recession impact and the purchasing power decrease, as well as due to the high dependence of businesses on private consumption. The empirical research data shows a decline in business profitability and cost management quality downtrend caused by the influence of several factors such as the ruble collapse in December 2014 ('Black Tuesday') and the subsequent liquidity squeeze. The 2014 research results indicate that the level of investment attractiveness of small business is the same in Moscow, St. Petersburg and other regions of Russia. However, the business value that reflects its usefulness to the owners is much lower in the regions outside Moscow and St. Petersburg. This is due to lower expectations for the return of the capital invested than in the Russian largest cities. The article examines a mechanism of collective investments (equity crowdfunding) in the private business and describes its advantages and disadvantages. This mechanism can stimulate the flow of private investments and expansion of the domestic capital market. According to the Central Bank, the market size of the equity crowdfunding borrowings in Russia is only 52,5 mln rubles in 2015, while according to the Massolution's report an estimated volume of global investments is 34 bln dollars, which is another confirmation of the fact that in Russia this mechanism is still in its infancy. To make this mechanism effective, it is necessary to form a legal framework that can help to protect the private investors' interests, provide the P2B lending market regulation and ensure good access for individuals.