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International Policy

Europe Discovers Venture Capital

Until recently, venture capital has been scarce in Europe, particularly compared with the abundance of capital available to start-up companies in the U.S. But that is changing. In 1997, European venture-capital firms raised $22 billion -- more than double the figure for 1996 -- with more than half originating in Britain.. Funding rose more than 650 percent in Germany and nearly 2,000 percent in Sweden. While American stock exchanges list around 1,500 high-tech companies, the Neuer Markt exchange in Frankfurt is just emerging with about 32 stocks. European venture capital has traditionally favored relatively mature firms -- but venture-capital investments in early-stage companies increased last year by 60 percent. Observers report the new start-up markets are sizzling. Markets on two exchanges are said to be up 168 percent and 322 percent during the past five quarters or so. By contrast, attempts by the Dutch government in the early 1980s to foray into venture capital turned into an expensive, scandalous failure, and government bureaucrats turned off the spigots in 1995. Source: "Europe's Great Experiment," Economist, June 13, 1998.

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