The development of a venture capital market in the European Union in favour of small & medium sized enterprises : how successful has it been?

Abstract

This study aims to analyse the development of the venture capital market in the European Union in favour of SMEs and to verify how successful it has been. The term 'venture capital' and its subject matter is an all encompassing topic which can create uncertainty and confusion for the initiated or less-informed companies. Venture capital, over the years has developed a very important role in the funding of companies at key points of change in their development. The introduction will discuss the characteristics of Venture Capital and why it is important small and medium sized enterprises. Access to finance is an important aspect of fostering entrepreneurship in Europe. The EIF' s venture capital instruments consist of equity investments in venture capital funds that support SMEs, particularly those that are in their early stages of development and those that are technology-oriented. The ETF's venture capital activity is backed by two sources of funding, namely: capital from the EIB Group (EIB and EIF) which forms the bulk of the EIF's investments; and capital from the European Commission which is allocated under two different programmes. These are the ETF Start-up Facility and Seed Capital Action. Both of these programmes have more specific eligibility criteria than the EIB Group operations. Chapter 3 will focus on the direct investment of the EIF and the regulatory environment with which it manages the Venture Capital Market.

Chapter 4 will analyse the situation of the Venture Capital Market in the EU. A particular attention will be given to the divergences between the Nordic and Southern countries and the successes and failures within the EU. Any venture capital review must include a perspective of the US experience because of its historical lead-time. The recent development in the European venture capital industry in favour of SMEs needs to be compared with another major venture capital market in order to be able to analyse whether it has been successful or not. Accordingly, the purpose of chapter 5 is to compare venture capital in the EU with that of the US. The study will then continue by presenting the picture of the Maltese venture capital market in favour of SMEs in terms of the demand and supply cycle, which is still in its embryonic stage. It will try to analyse how this can be successful now that Malta joined the European Union.