EuVECA Funds

EuVECA

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EuVECA Funds were introduced in 2013, as a mechanism to support investments into qualifying funds which are designed to support start-up and innovative companies in the European Union, with little to no cross-border barriers, or passporting requirements - making the funds cost effective and fluid enough to market throughout Europe. 

EuVECA funds, like EuSEF funds establish a framework for investment funds which invest in unlisted SMEs. Both EuVECA and EuSEF funds are designed to allow flexible investments from private investors into SMEs in a bid increase economic growth, whilst supporting early stage technology, research and development companies.  

Growth of EuVECA & EuSEF Funds

Venture Capital funds have been around more for than 30 years, however their popularity has increased since 2010, following some high profile ‘unicorns’ and a number of similar success stories originating from venture capital backing.  Also, governments, such as the UK and European Union have launched a number of tax-efficient incentives to private investors to participate and invest in early stage start-ups in a bid to kick start the economy post financial crisis 2008-9.

Venture Capital Trusts:  VCT’s are a tax efficient structured domiciled in the UK where the income and capital gains have a different tax treatment.  Naturally, the risks are higher investing in startup companies – hence the incentives such as tax relief.

For EuVECA Funds, please click here

Growth of EuVECA & EuSEF Funds

The Growth of EuVECA and EuSEF funds have seen a relatively low take up since being made available in 2013, with approximately 72 EuVECA registered with ESMA to date.

As they are a voluntary fund structure, the growth would largely be subject to the investors and participant interests.  It is also worth noting that the UK FCA has certain conditions that would need to be met by the EuVECA / EuSEF manager, in that 70% of the capital received from investors must be on the basis that that funds’ primary objective is to;

  • provide services or goods which generate a social return 
  • employ a method of production of goods or services that embodies its social objective, or 
  • provide financial support exclusively to social undertakings as defined in the 2 points above

Further information from the FCA regarding EuVECA and EuSEF funds can be found by clicking here

This can sometimes pose as an operational or commercial challenge (for example VC funds which invest in early stage companies to then sell their stake to a larger PE fund for profit), hence some investors and VC funds opt for a traditional fund structure rather than a EuVECA fund. 

AIFM Hosting & EuVECA / EuSEF Funds

EuVECA and EuSEF funds not subject the AIFMD regime and therefore can be marketed and promoted throughout the EU without an AIFM in place.  The EuVECA and EuSEF must, however be registered with the local regulator in its home country and also with ESMA.