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The funding of venture capital in Europe: Issues for public policy

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  • David Mcglue

Abstract

This paper considers the key questions facing public policy-makers in the European Union in developing policies to stimulate venture capital. The first is how to define when and where public intervention is necessary and justifiable. The second is to identify precise policy objectives. Thirdly, should the public sector take the same or more of the risk and less of the return than the private sector? Then, what instruments should the public sector deploy (equity, grants, guarantees or loans, or a combination)? Finally, when should public intervention cease? The paper considers the experience of instruments at both European and national levels and some of the policy debates. It concludes with reminders that venture capital is not the most appropriate form of finance for all small businesses; that venture capital will not in any case succeed in promoting growth unless an appropriate framework exists also on the demand side to support the emergence of growth companies; and that venture capital in Europe must be complemented by the growth of entrepreneurial finance from other sources, notably business angels, who have played a key role in the US experience.

Suggested Citation

  • David Mcglue, 2002. "The funding of venture capital in Europe: Issues for public policy," Venture Capital, Taylor & Francis Journals, vol. 4(1), pages 45-58, January.
    • Handle: RePEc:taf:veecee:v:4:y:2002:i:1:p:45-58
    DOI: 10.1080/13691060110091246
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    References listed on IDEAS

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    1. Emmanuelle Dubocage & Dorothée Rivaud-Danset, 2002. "Government policy on venture capital support in France," Venture Capital, Taylor & Francis Journals, vol. 4(1), pages 25-43, January.
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    Cited by:

    1. Iman Seoudi, 2015. "Public Policy For Venture Capital: An Integrated Framework," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 9(4), pages 31-51.
    2. Karsai, Judit, 2002. "Mit keres az állam a kockázatitőke-piacon?. A kockázati tőke állami finanszírozása Magyarországon [What business does the state have on venture-capital markets?. State funding of risk capital in Hu," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(11), pages 928-942.
    3. Judit Karsai, 2004. "Can the state replace private capital investors? Public financing of venture capital in Hungary," CERS-IE WORKING PAPERS 0409, Institute of Economics, Centre for Economic and Regional Studies.
    4. Schilder, Dirk, 2007. "Venture capital syndicate networks: the determinants of interconnectedness," Freiberg Working Papers 2007/03, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
    5. Schilder, Dirk, 2006. "Public venture capital in Germany: task force or forced task?," Freiberg Working Papers 2006/12, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.

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