PE says it can help alleviate Eurozone crisis

The industry’s European lobbying arm has welcomed the continent’s proposal for a venture capital marketing passport, saying it would help drive growth in the struggling region.

Trade body the European Venture Capital and Private Equity Association (EVCA) said proposals to introduce an EU-wide “marketing passport” for venture capitalists should be passed to help alleviate economic malaise.

In a consultation response to the proposals the EVCA said allowing start-up and early stage investors to raise capital freely throughout the EU would help finance and develop the region’s small and medium-sized businesses across borders.

Karsten Langer, chairman of the EVCA, in a statement said: “In the face of sovereign debt crises, fears of financial market risk and stock market volatility, it is encouraging to see the European Commission focusing on a positive agenda that will help drive growth and prosperity in Europe over the long term. Namely facilitating access to

The EU does a great deal to encourage new business creation, but unless this is followed through with access to finance for SMEs throughout their development, it is so much lost potential

Karsten Langer

finance for SMEs.”

The trade body noted fund managers were experiencing the most difficulty in fundraising (and not investing) in their cross-border activity. Of the 26,000 companies in Europe backed by private equity and venture capital, around 24,000 are SME’s, according to the EVCA.

A number of EU member states have been left grappling with ballooned national debts following the banking meltdown in 2008. Most recently some investors and speculators have targeted France as the next country potentially struggling to meet debt payments and lose its Triple-A credit rating.

The industry did however express some areas of concern in the proposals, which were released last June. Most notably the need to clarify the legal definition of a SME in order to confirm businesses under the same parent fund are not linked together and consequently lose their SME status.

Allowing small funds a light-touch opt-in to the Alternative Investment Fund Managers Directive was also raised by the EVCA in order to address the risk LPs may disfavour unregulated funds.

“The EU does a great deal to encourage new business creation, but unless this is followed through with access to finance for SMEs throughout their development, it is so much lost potential,” said Langer.

The European Commission accepted comments on its proposals until 10 August, intending to put forward a legislative proposal by the end of this year.