Commission sets out to create single market for venture capital

It’s the same old story: currently each member state has different rules and regulations on setting up funds and making investments, creating huge overheads for any VC firms with ambitions beyond their domestic markets. The result: lots of small pots of money devoted to local companies and no critical mass.

Rather than attempting to build a pan European framework, the Commission is advocating a system based on mutual recognition of current national systems.

The Commission Vice-President Günter Verheugen, who is responsible for enterprise and industry, said stimulating the development of cross-border funds would enable venture capital funds to specialise and diversify their portfolios.

“This is particularly important for smaller funds and allows smaller countries to benefit from larger venture capital markets.”

At present there are 27 different sets of rules, a situation that adversely affects both fundraising and investing. Although there are larger funds that operate across borders smaller funds tend to avoid investing outside their home market, limiting their ability to expand and reach a critical mass of deals.

A system of mutual recognition of venture capital funds should established in which. national authorities acknowledge that funds based in other member states are already subject to the regulatory regime of their home country, says the Commission.