The economic crisis : a new order for venture capital ?

The Bâle III and Solvency II agreements recently attracted public contempt because the private equity industry, recognising the threat, thought that these new prudential rules might drain it of its resources. However, according to Denis Lucquin, European venture capital – the baby brother of this industry which is essentially dominated by LBOs (Leveraged buy-outs) – is faced with much more serious difficulties as a result of its inability to generate satisfactory yields. This inability is aggravated by the introduction of investment opportunities which are founded on tax incentives such as innovation-focussed investment funds in France (FCPI) or the Venture Capital Trust in Great Britain. It is a case of bad money driving out good. Even established management companies which have produced good results are finding it increasingly difficult to raise funds. Denis Lucquin thinks that rescue will come with the conversion of financial tools such as French investment funds (FCPI) into funds of funds, and the creation of a pan-European stock market offering a means for venture capital exit.