Venture Capital in Europe: Federal Trust Series

Europe s venture capital market is dwarfed by that of the USA, and Europe s employment performance continues to be disappointing. The two phenomena are closely connected. Small and medium sized businesses find it difficult both to get started and to grow into big companies. In a worst case scenario, European entrepreneurs are faced with skepticism and ignorance in the banking sector, an absence of stock options, unreasonable legal and bureaucratic obstacles, a high cost of labour, unhelpful government agencies and unsympathetic tax authorities. How in these circumstances is it possible to grow global companies in Europe? This Federal Trust Report investigates how this question might be answered. It sets forth the findings of an eminent and wide-ranging study group, which proceeded under the chairmanship of Sir Brian Corby. The report examines the extent of the current integration of Europe s capital markets and asks what measures are necessary to ensure a better provision of venture capital. The study: * Considers how the US has achieved its substantial concentration of capital and entrepreneurial activity during the last two decades; * Compares the fragmented stock markets and differentiated regulatory regimes of Europe with the coherent, Federal-level authorities of the USA; * Examines whether the comparative absence within the European Union of funded pensions that could provide exit opportunities for venture capitalists is a major weakness, and, if so, whether it can be rectified; * Examines the role of the EU institutions, and especially that of the European Investment Bank, which through the European Investment Fund (1994) and the European Technology Facility (1997) has enteredthe venture capital market.* Looks at the potential development of EASDAQ; * Examines the role of the media, universities and regional and local authorities in creating the right circumstances for the development of European venture capitalism. In reporting its findings, the study group proposes amendments EU legislation in the fields of pensions reform, financial services, accountancy, taxation and competition policy. The report also suggests how enhanced management expertise, and the establishment of specialist boutiques and innovatory banks could play a wider role in providing funds and in supporting enterprise.