EUROPE has yet to produce a rival to Silicon Valley, but London’s “Silicon Roundabout” by Old Street station is closest. As a funding hub, the city’s venture-capital industry tends to attract more money than rivals in Berlin, Munich or Paris. And more venture capital is invested in Britain, relative to its GDP, than in any other big European economy. Britain’s vote to leave the European Union threatens this lead. Besides unknown risks, there is a prosaic worry: the most important backer of such firms is the European Investment Fund (EIF), an EU institution, whose mandate includes “fostering EU objectives”.
As the biggest investor in European venture funds, the EIF supplied almost a fifth of all commitments last year, with Britain, France and Germany the main recipients. It is also among the largest and earliest investors in any fund. For every pound it pumped into Britain in 2015, the EIF reckons it mobilised another four of private capital. Venture-capital managers debate the extent to which the EIF spurs private investment, but generally accept it is a linchpin of the industry. Nenad Marovac, of DN Capital, a technology investor, says its…Continue reading