The Development of Venture Capital Fundraising in Europe

How to explain the dramatic development of venture capital fundraising in Europe from 1996 to 2000 and its severe downturn in 2001? To answer this question, the author goes through a survey of the literature on the economics of venture capital and explains the analytic framework underlying the discussions about the European venture capital market. He then proposes an econometrics model using the regression methodology and panel daya techniques, discusses its empirical results and findings, and puts forward some policy recommendations. The author shows in particular that the main empirical determinants of venture capital fundraising in Europe are ICT expenditures, labour market rigidities, and the regulatory environment. With a strong negative coefficient, the number of IPOs surprisingly does not turn out to be significant in the expected way, which is contradictory with the stylised fact identified in the literature, while possibly being the consequence of European stock market fragmentation.