Venture capitalists are worried that their liquidation preferences are stifling dealflow in the earlier stage industry at a time when start-ups are struggling to attract follow-on funding.

Ernie Richardson, a partner at MTI, which funds early-stage high-technology companies in the UK, says: "Entrepreneurs and angel investors are now reluctant to bring deals to venture capitalists, causing a breakage in the funding chain, and start-ups are not achieving their potential. Companies that could turn into world-class companies might only turn into modest companies."