New figures show that the Welsh Government, through its investment bank operations, have invested nearly £160m in equity into firms in Wales since 2002.
An analysis of equity investments over a 16 year period to 2018 into SMEs has been undertaken by new research body Economic Intelligence Wales (EIW).
It shows a total number of 628 deals, with a combined value at time of investment of just over £158m.
A return on investment figure, including any dividend payments, or through exits, has not been disclosed - nor the level of equity written off and the current valuation of stakes.
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The deals were made by the Welsh Government's investment bank subsidiary Finance Wales, which was set up in 2002, and its successor in the Development Bank of Wales, which was launched in 2017 and which like Finance Wales is also 100% publicly owned, while operating at arm's length from government.
EIW, which was set up last year, is a collaboration between Cardiff Business School, the Office for National Statistics and the Development Bank of Wales.
Its role is to collate and analyses data to create a reliable insight to help better understand and improve the Welsh economy.
Its latest data shows that all 22 local authorities in Wales, Cardiff has the highest share of deals between 2002-18.
The capital authority saw 187 equity investments over the period, representing 30% of total number of deals in Wales.
On value Cardiff had 27% of the overall figure, or £42.6m. The average deal size was £228,000, compared to a Welsh average of £287,700.
Pembrokeshire, although based on just 16 deals, had the highest average deal size in Wales at £559,863. Finance Wales had been a significant equity investor in the Bluestone tourism resort.
The influence on Cardiff is not wholly unsurprising given that it has the biggest business population of any local authority in Wales.
Swansea is ranked second with 9% of total deals with a combined investments of £12.7m, accounting for 8% of the overall value figure.
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Two local authorities, had less than 1% - although rounded down to 0% in the table below - in Anglesey and Merthyr on total value of deals.
Equity investment by Finance Wales/Development Bank of Wales 2002-18
According to EIW, Wales' total share of new equity deals in the UK was 3% on number and 1% on value, with £59m, in 2017.
On number Scotland had 8.1% and Northern Ireland 1.4%
In 2015, the percentage on value for Wales in relation to the UK as a whole, was 1.4%.
And research from Beauhurs shows that in 2018, there were 71 equity deals worth £64.6m (all investment and not just the development bank) made in Wales.
While EIW said that Cardiff is an emerging equity cluster, more needs to be done to develop the demand for equity across Wales and in more sectors.
Equity clusters are a key component of regional entrepreneurial ecosystems which bring accelerated business growth and innovation to create a dynamic regional economy.
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EIW's Equity Clusters in Wales report examines the different factors which need to be present to bring equity investors and investees close together to facilitate entrepreneurial activity and economic growth.
Factors include the presence of established and stable urban markets and networks based on information and knowledge sharing.
Over 12% of all Welsh SMEs are based in Cardiff, making it one of the more established urban markets in Wales.
With a higher number of high tech and high growth firms based in Cardiff and south east Wales compared to the rest of Wales, it has all the ingredients needed to continue to develop successfully as an equity cluster, concludes EIW.
Chief executive of the Development Bank of Wales, Giles Thorley, said:“This report recommends that while Cardiff is an emerging equity cluster, the demand and supply of equity investment needs to grow across the whole of Wales and within different sectors.
"Whilst much has been done to support equity investment already, the Development Bank of Wales is committed to attracting more equity investment to Wales and developing the right environment for this growth is key for the creation of equity clusters across Wales.”
Although the development bank can invest up to £5m per equity round, the report highlights issues in sourcing equity from private sector sources in Wales for larger equity deals of over £500,000.
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Mr Thorley said: “Part of our role as a pan-Wales investor is to diversify sources of capital by alerting investors to opportunities across the whole of Wales and to play a part in opening up new opportunities for investment.
Initiatives such as Angels Invest Wales and business accelerators will be crucial in doing so.
"Consultations with notable financial services organisations show that there is a real strength in continuing Cardiff’s development as an equity cluster and there are opportunities to do this across Wales.
"Weaknesses such as low number of university spinouts in Wales and low entrepreneur awareness of equity funding opportunities across Wales need to be addressed as a priority."
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