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Venture Capital

Volume 84: debated on Tuesday 22 October 1985

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asked the Chancellor of the Exchequer (1) what information he has as to whether the Treasury's definition of the term venture capital is comparable with definitions adopted by other European Economic Community countries;(2) what is the Treasury's definition of the term venture capital; and whether this includes

(a) capital made available to any persons by banks or licensed deposit takers, (b) loan capital, preference share capital or ordinary equity share capital and (c) capital available to persons carrying on trades which are excluded from the scope of the business expansion scheme;

(3) what information he has about any published or unpublished records of the provision and sources of venture capital in the United Kingdom since 1979.

[pursuant to his reply, 21 October 1985, c. 8]: There is no generally accepted comprehensive definition of "venture capital". The essence of venture capital investment is that investors support entrepreneurial talent with finance and often in addition with business skills, frequently from a very early stage in the life of the business.

Venture capital investment can take various forms. Often, a package of financial support is provided which, in addition to ordinary shares, may include preference or convertible preference capital and loans of various kinds.

Venture capital investors include individuals, specialist venture capital organisations, which may be independent private companies or subsidiaries of banks and insurance companies, and other organisations.

The Treasury's "Economic Progress Report" for September-October 1985 quotes figures for the provision of venture capital since 1979, from estimates published in the UK Venture Capital Journal by Venture Economics Ltd. These figures include BES investments by approved investment funds but exclude direct BES investment by individuals, investments made by non-specialist institutions, and private placings arranged by stockbrokers.

The European Venture Capital Association has commissioned a study from Peat Marwick Mitchell and Co. comparing the provision of venture capital in different EC countries which will be published shortly. However, because of institutional differences and other problems, definitions will inevitably not be strictly comparable.