Latest reports indicate that Government funding represents the highest individual fundraising source for the VC sector at European level, accounting for an average of approx. 25% of funds raised by investors in the past 5 years with a 30% peak in 2020 and 18% low in 2021. Even in 2021, it tops the ranking of fundraising sources, alongside Corporate Investors. There are indeed significant differences across European regions (52% in CEE, 37% in Southern Europe, 28% in France & Benelux, 26% in DACH, 19% in Nordics, and 12% in UK & Ireland).
The existing research on the performance of various forms of Government direct or indirect involvement in VC / Equity Investment (GVC / Government VC, Hybrid GVC bringing in private VC expertise, and various blended funding solutions piloted by Innovate UK, EC/ EIC Fund, FoF/ LP programmes) suggests that Government investment typically underperforms the traditional private VC (not necessarily a surprise…) but compensates when it comes to alignment with economic policy/ big priorities.
The existing research on the performance of various forms of Government direct or indirect involvement in VC / Equity Investment (GVC / Government VC, Hybrid GVC bringing in private VC expertise, and various blended funding solutions piloted by Innovate UK, EC/ EIC Fund, FoF/ LP programmes) suggests that Government investment typically underperforms the traditional private VC (not necessarily a surprise…) but compensates when it comes to alignment with economic policy/ big priorities.
We collected a sample of responses and their views are expressed below.
What SHOULD BE the most used form of government support to VC in the coming years?
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82% of our survey respondents reported that the government should support the VC market through funds of funds followed closely by 73% believing it should be in the form of tax benefits. However, direct investments were the least popular with 9% of reporting it.
What WILL BE, in reality, the most used form of government support to VC in the coming years?
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82% reported that grants-funding for innovative companies will be, in reality, where the government supports the VC market. Interestingly, these grants-funding programmes have been increasingly popular in the European ecosystem so this seems to be where the government can play an active role in. Funds of funds remain popular with 64% believing it to be, in reality, where the government can support the VC market.
Should be versus Will be
Interestingly, when we compare the two questions, funds of funds were consistently chosen as the form of support that the government SHOULD and WILL be able to provide for VCs. However, tax benefits have the biggest disparity with respondents believing it to be the form of support the government SHOULD give the VC market however it is the least popular method in regards to what WILL be.