Crowdfunding Venture Capital in Europe
Columbia Journal of European Law: Preliminary Reference, Forthcoming
9 Pages Posted: 4 Nov 2015
Date Written: October 1, 2015
Abstract
Crowdfunding shows signs of taking over the domain of venture capital as an unregulated, democratic means of innovation finance. Europe has always lagged behind the United States and even Israel in terms of productive startup entrepreneurship and creativity. Even Asia has already overtaken Europe in crowdfunding volume. The Old World has also never mustered commercial funding sources and government as well as legislative support for large-scale innovation finance, and also does not have a mentionable market for risk capital in general. The EU Commission is determined to change this with a series of initiatives briefly discussed in this paper to reduce excessive dependence of European small-and-medium-sized enterprises on traditional bank financing and to stem deal flow into the U.S. venture capital scene as well as into IPOs floated on U.S. capital markets. The biggest threat to new well-intentioned initiatives is the European habit of regulatory overdrive even with regard to merely anticipated problems that creates a very real risk of stifling financially risky R&D and, in overprotective mode, preventing solutions through “venture capital for the 99%.” Already as of the date of this paper, a full dozen EU Directives would apply to crowdfunding projects, not to mention national legislation and regulation. No wonder, then, that regulatory capture (through lobby efforts and other institutional means not commonly accessible to startups and financial engineering vehicles) is one of few modalities of entrepreneurial survival in this regulatory environment. The paper examines perspectives of accommodating risk as a trade-off for quantum leaps of innovation.
Keywords: Crowdfunding, Venture Capital, Startup, Entrepreneurship, JOBS Act, Capital Markets Regulation, Securities Regulation, European Union
Suggested Citation: Suggested Citation