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Evaluation of Commission's "Seed Capital" pilot scheme (1989-1996)

An external evaluation of the European Commission's "Seed Capital" pilot scheme, which ran from 1989 to 1996, concludes that it has made a positive contribution to the financial environment for European enterprises.

Under the scheme, 23 funds were established between 1990 and...
An external evaluation of the European Commission's "Seed Capital" pilot scheme, which ran from 1989 to 1996, concludes that it has made a positive contribution to the financial environment for European enterprises.

Under the scheme, 23 funds were established between 1990 and 1993, with the Commission giving each fund a repayable advance to cover 50% of its operating costs for five years. Fifteen of the funds, which were located in eligible regions, received additional funding through the Business and Innovation Centre in their area.

The evaluation highlighted the small scale of seed capital investment in Europe in comparison to the USA: only ECU 33 million per year was invested in Europe between 1991 and 1995 in seed and early stage investments, in comparison to ECU 115 million per year in the USA. Whilst only 40 or 50 funds in Europe are specialized in seed capital, there are around 250 in the USA.

The evaluation has shown the difficulty of defining the term "seed capital", and has highlighted two distinct types of funds: private funds with a purely commercial approach; and small local or regional funds aimed at local development and job creation. The extremely high risk represented by seed capital investments restricts the private sector's interest as achieving a sufficient return on the investment without jeopardizing the survival of the enterprise is a major problem.

The general consensus was that the Commission's scheme has had a positive impact on the financial environment for enterprises during start-up and in terms of enterprise creation and job creation. In particular, it seems that the majority of the 23 funds would not have been established without the Commission's assistance. When the numbers of stable jobs created is compared to the performance of programmes under the Structural Funds, the scheme appears very positive.
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