Nearly 40% of all the funds pumped into European VC last year came from statebacked sources, up from just 14% in 2007 (see chart). The EIF alone ploughed
€600m ($800m) into VC funds last year, out of a Europe-wide total of €4 billion.
On top of this, nearly every country has its own pet programme to back chosen
venture capitalists.
Despite taxpayers’ generosity, few think Europe’s VC industry has much chance of
attracting American levels of capital from private investors, given its feeble record.
Venture capital in Europe has delivered returns of just 2.1% a year since 1990,
according to Thomson Reuters, making it perhaps the worst investment class
outside Japan (American VC managed around 13%). The 2008 crash, which came
just as investors were getting over the fortunes they lost in the internet bubble,
sapped what little interest remained.