The creation of university venturing funds over the past decade has been called into question as they have had "negligible" impact on entrepreneurs.
The European Union-funded Vico Project found public sector-backed venture capital (VC) funds, of which universities were a subset, made up 19% of investments* in the 759 venture capital-backed companies in the study of 8,370 European high-tech entrepreneurial firms.
However, the report from the research, Venture capital: Policy lessons from the Vico project, said: "University VC investments appeared to have a negligible impact regardless of the age of recipient firms. In other words, public sector VC plays a significant financing role for very young firms – those aged less than five years, when it is provided from government funds as contrasted to university funds. This result questions the creation of a large number of university VC funds in Europe in the last decade."
The VCs that added the most value were independent, which as they tended to invest in later-stage companies meant public funds contributed to the health of the entrepreneurial ecosystem.
The report looked in more detail at France and the UK and found there had been some efforts to support university venturing.
In France since the second half of the 1990s, the emphasis has gravitated from supporting large companies towards the promotion of high-tech entrepreneurial ventures and the emergence of a VC industry. The report said: "There have been many measures to support the creation of university spin-offs and other technology-intensive firms. These have been fairly successful and have promoted the creation of a fair number (100-150) of new high tech firms annually.
"However, in terms of the promotion of a VC industry, the measures have been less successful. Especially private seed and early stage investments have virtually disappeared and overall, a large part of VC investment in the country is supported by public schemes."
In the UK, regarding high-tech, capital intensive start-ups, there was a need for funds able to support these firms in multiple rounds, the Vico report said. It added: "This does not appear to have been the case so far: multiple schemes have been implemented, but some of them have not been cost-effective because they lacked further rounds of public support (University Challenge Funds, for example)."
*There were a total of 3,475 investments – events in which one VC invests in one company in a given point in time – in these 759 VC-backed companies. For example, a syndicate of three VC investors involved in two rounds of financing generates six investments.
