VC funds may get EU ‘passport’

The directive would allow VC funds in the EU to invest in other EU member states. The impact on US-based firms is not clear, but the NVCA, led by Mark Heesen, is 'watching carefully'.

Proposals under consideration in the European Commission would allow venture capital funds in the European Union to invest anywhere in the EU through a “passport”.

The passport would create a common statute for funds that would be recognised across the EU, the commission said in a statement.

The measure is similar to the EU Directive on Alternative Investment Fund Managers that passed the European Parliament last year. The directive allowed non-EU based private equity firms to “market” their funds to investors in EU member states.

The VC proposals would create a similar passport for venture capital funds supporting businesses at an early stage of development to invest in different European countries.

Mark
Heesen

“A clearer cross-border regulatory framework for making venture capital investments would lower operating costs and risks,” said a spokesman for the European Private Equity and Venture Capital Association, in a statement.

This particular portion of the EU directive will not impact the vast majority of US-based venture funds as the passport goes to those funds that are established in one of the EU countries.

“NVCA remains concerned that as the meat is put on the bones of the directive that US based venture funds are not put at a disadvantage to European based funds in terms of our ability to invest in European based companies or to solicit funds from European Union based limited partners,” said Mark Heesen, president of the National Venture Capital Association. “This is a protracted process which we are watching carefully.”

The European Commission is seeking to put in place measures by the end of next year to improve the free movement of capital in the EU.