ABSTRACT
This chapter examines the factors which influence the supply of, and demand for, venture capital funds in Europe. Higher levels of institutional investment activity would be further engendered by a genuinely integrated pan-European risk capital market. Investors would be attracted as a result of improved accounting standards and better investor protection, as well as ease of trading. Business angels occupy a crucial part of the spectrum of sources of finance for business start-up and expansion by investing in the ‘gap’ below which it is uneconomic for venture capital funds to meet needs because of their cost base and the high transaction costs involved. Many countries have recognised that the United States of America provides a useful laboratory in which to study the impact of taxation, particularly capital gains tax, on venture capital. Capital gains tax on the disposal of assets will also be a crucial factor for entrepreneurs.
