Introduction The role of risk capital has recently emerged as a central issue in the debate on job creation and the reduction of unemployment in Europe. A paper from the European Commission in April 1998 entitled Risk Capital: A Key to Job Creation in the European Union (Commission, 1998) observed that there is an emerging consensus within the EU that the Union must become far more entrepreneurial if it is to create the jobs to reduce, sustainably and substantially, its unemployment levels. The report suggested that two conditions are required for this to happen. First, sources of risk capital have to be developed to ensure that appropriate financing instruments are available to European entrepreneurs, and second, risk capital investors need a stream of good investment opportunities as well as a fair reward for risk taking. Specifically, the report argued that:

European entrepreneurs must be able to access the right financing, at the right price, at the right place and at the right time to develop their companies and their ideas. This means European entrepreneurs must be able to access start-up capital; intermediate and development capital as the company expands; and finally access institutional and private investors supported by a sizeable, liquid, secondary European stock market where their shares can be traded ... In this field the European Union is weak on all fronts.