| Tweet | | | | investments. Not only is this a very costly process, |
| Share | | | | involving as much paperwork as a tax return, but it |
| In a worrying move, the European Commission [EC] | | | | could be dangerous for a company in a competitive |
| announced recently that it plans to create a large | | | | environment. It could easily be the reason that |
| number of new regulatory agencies to watch the | | | | companies go the non-venture route of investing. No |
| investment market, in light of the recent financial | | | | one wants their opposition to know their business |
| collapse across the globe. These agencies will have | | | | strategy. And every cent that a company spends |
| the very broad assignment of creating more | | | | doing paperwork is a cent that will not be put |
| transparency in the market and watching for signs of | | | | towards start-ups. |
| a possible impending meltdown. | | | | Also, the directive immensely increase the amount of |
| The problem is that these agencies will monitor any | | | | money that a company has to set aside in their |
| European business or organisation that manages an | | | | reserves. This is a way to ensure that companies |
| investment fund, which includes a broad swathe of | | | | have enough money to pay back investors if a deal |
| European organisations. This includes all of the | | | | goes bad. Unfortunately, the opponents of the new |
| venture capital firms under EU law and will create a | | | | directive say that the new reserve rules are way too |
| burden for all of these companies, in terms of | | | | high. The new requirement is a 25% reserve. In one |
| compliance. | | | | case that the opponents modelled, this required a |
| Due to this, a large number of organisations have | | | | company to increase its reserves from £5,000 to |
| joined together to oppose the new legislation. Using | | | | £8 million. None of this money can be spent on |
| the platform that this new legislation will curb | | | | start-ups. |
| innovation and damage start-up potential, these | | | | And finally, the directive has rules that have caused |
| groups have proposed that the legislation be modified | | | | many to cry foul over international trade. European |
| or scrapped altogether. Unfortunately, the groups are | | | | venture capital firms will no longer be allowed to |
| quite fragmented and, as such, have been unable to | | | | invest outside the region. And US venture capital |
| make any significant headway in preventing the | | | | firms will no longer be allowed to invest in Europe. |
| legislation from passing. | | | | Many say that this could have a huge negative |
| The groups do have a number of very specific | | | | effect, as US firms fund a large portion of start-ups |
| complaints about the legislation. For example, all | | | | in Europe and many European venture firms have |
| venture capital firms will have to publicly disclose | | | | ongoing business outside of Europe. |
| strategy, planning, and a complete record of current | | | | |