In London on Tuesday, a Treasury-sponsored conference - "Venture Capital, Growth and Employment in the European Union", to be held at the Guildhall - will attempt to address the issue. The Chancellor of the Exchequer, Gordon Brown, will make the opening address, and the French Minister of Finance, Dominique Strauss-Kahn, is also due to speak.
For New Labour, promoting venture capital as an essential tool of wealth creation is part of its mission, and one of the themes it has been addressing during its current six-month presidency of the EU.
"The challenge for Britain is to create a stronger venture-capital industry and to orient venture capital to high-risk, early-stage and start-up companies," Mr Brown said in a recent speech.
In the United States, he said, 25 to 30 per cent of venture capital goes to such companies. The share of venture capital taken by hi-tech companies is 50 per cent in the US, but only around 20 per cent in the UK. Mr Brown called for "a new approach in Britain to risk-taking; we need to increase the number of entrepreneurs and to raise the survival rates of small businesses".
There were several measures in the last Budget aimed at helping small businesses and their investors. There is also the Treasury's Growth Unit, set up after the last election with a wide-ranging brief to examine all the problems faced by growth concerns in order to develop a New Labour- style entrepreneurial culture. But as Robert Lucas, a director of investors CVC, warns: "No amount of tax breaks or loan guarantees can determine whether a deal is good or bad, only the fundamental qualities of the business in question."
And the City looks less interested in the slog of true venture capital, compared with the huge gains to be made from restructurings and mega- size management buy-outs. Large risk-based deals aimed at mature companies are all the rage. In thepast few months we have seen many: for instance, the pounds 860m IPC magazines sale to Cinven, or the pounds 800m deal to create HMV Media through the merger of Waterstone's and Dillon's booksellers and HMV music stores
While big deals are the flavour of the month - some estimate that MBOs are set to smash all records this year, with a staggering pounds 20bn invested, double last year - there are concerns that smaller businesses are being overlooked in the rush. The concerns are part of a wider debate over the rapidly changing face of venture capital in the UK. Financing techniques imported from the US, along with US money, have seen ballooning interest in the returns that restructuring and MBO-style deals generate.
The difference between old style venture capital and private equity is partly a matter of definition. Heavy hitters such as Cinven, CVC and Doughty Hanson, among the big suppliers for these private-equity deals, argue that they are not in the business of supplying traditional venture capital. One source, who specialises in highly leveraged transactions, argues that the shift reflects a new culture of risk-taking, but one that leaves the traditional venture capitalist out in the cold. "3i aren't it any more. It represents the old-fashioned approach to venture capital, in seed-corn investment and the like."
The simple truth is that the big guns would be all too keen to invest in smaller companies but, as the leverage specialist notes: "The reason these deals aren't popular is because they are a lot more intensive, the risks are higher and the rewards aren't necessarily any greater."
But there is concern that, as the mega-deals flower, less money is left in the pot for the likes of smaller start-up companies. However, 3i, the doyen of the British venture capital community, vehemently denies that this is the case.
Jim Martin, director of technology investments for 3i in Europe, says: "I think one thing for sure is that there is an awful lot more appetite for investing in early-stage high-technology companies than there has been, and there is renewed enthusiasm for the sector."
He concedes, however, that there is a much higher risk attached to hi- tech investment - one reason, he points out, why recently floated technology businesses can often see their share prices dip afterwards - if they do not soar skywards. Either way, the market finds it hard to value such companies.
Ian Armitage, managing director of the private equity division at Mercury Asset Management, says that City funds flowing to private equity deals would be invested in publicly quoted companies if they were not in this arena.
Mr Armitage adds that, significantly, UK pension fundshave only 0.55 per cent of their assets invested in private companies. In the US that figure is closer to 4 per cent, and he expects the UK to follow suit.