Entrepreneur may be a French word, but as Christian Cleiftie ruefully notes, it isn't yet a French phenomenon.
"The problem of the availability of entrepreneurs here is a large one," said Cleiftie, the director general of Sofineti, a French venture capital fund.
"Venture capital in Europe is a pretty short story," asserted Frank Caufield of Kleiner, Perkins, a top venture capital firm based in San Francisco. Europe lacks the business-minded innovators and the culture of financial risk-taking that has created America's venture capital strength, he said.
The dearth of entrepreneurs -- as well as other serious obstacles -- hasn't stopped Cleiftie and like-minded investors from trying to give venture capital a European accent, however.
In the last two years, the number of French venture capital funds has trebled to 60 while more than 1 billion francs (roughly $125 million) has poured into those funds. Similarly, there are now nearly 100 venture capital firms in England -- four times the number that existed only five years ago, according to the Venture Capital Journal.
Since 1981, more than half a billion pounds have filled British venture capital coffers, and nearly half that amount was raised last year alone. A tiny venture capital community is even taking root in West Germany with roughly 700 million deutsche marks available for investment.
This surge in venture capital reflects a growing sentiment throughout the continent that entrepreneurship and the risk capital to fund it are vital if Europe is to keep pace with the United States and Japan in technological innovation and global market competition.
While the continent's fledgling venture capital industry is puny compared with the $11 billion in established American venture funds, Europe's governments hope it eventually will spark the same kind of success that has turned California's Silicon Valley and Boston's Rte. 128 into enviable models of economic growth.
"Whether conservative or socialist, the governments have been very supportive of venture capital efforts," said Cleiftie, who also is president of the 18-month-old European Venture Capital Association.
Perhaps the key ingredient stirring venture capital excitement in Europe is the creation of capital markets for young companies. Venture capitalists investing in start-up companies generally reap their returns in one of two ways: They either sell the company and collect their share of the proceeds or take the company public and own a valuable percentage of the stock. A successful public offering can make millionaires out of both venture investor and entrepreneur.
In the United States, venture-funded companies usually are taken public on the over-the-counter stock exchanges. Not until recently, however, have France and Britain had active over-the-counter exchanges.
"It is a major revolution," Maurice Tchenio, a Paris-based venture capitalist, said of the Second Marchais, the French over-the-counter stock exchange created in early 1983. The new capital market has convinced entrepreneurs that there is now a new path to riches.
Tchenio pointed out that 35 companies were taken public on the new exchange in 1984. That's a fairly small number, he conceded, but before the Second Marchais, barely two companies a year were taken public.
Similarly, creation of Britain's unlisted securities market (known as the USM) in 1980 by the London Stock Exchange has bolstered interest and investment in the venture capital arena dramatically.
"The USM was the key for us," said Ronald Cohen, the managing director of Alan Patricof Associates' London office, adding that his portfolio now has three companies ready to go public.
These new over-the-counter markets can turn entrepreneurs into instant millionaires. Cohen, pointing out that the USM has created nearly 300 "paper millionaire" entrepreneurs since its formation, said that the prospects for great wealth now means that English managers no longer cavalierly dismiss the entrepreneurial option.
"They're doing the sums now to see if joining a venture-funded company might make them rich," Cohen said. "I think that British managers can be as greedy and ambitious as their U.S. counterparts."
"It is the light at the end of the tunnel for entrepreneurs," added Simon Hochauser, who runs the St. James Fund, a one-year-old venture capital firm funded primarily by the Rothschilds.
The USM, plus new tax-shelter business expansion schemes designed to encourage investment, has put Britain at the cutting edge of venture capital growth in Europe.
Despite structural changes in the risk capital environment, Europe's venture capitalists are having a hard time finding the blend of technologies, entrepreneurs and skilled managers they need to assure the success of new businesses.
"We don't have the same role models for entrepreneurs that Americans do," Cleiftie said.
Alan Patricof's Cohen emphasizes that European managers traditionally join large companies and stay with them until retirement. Moreover, he believes there's something about the French, British and German national character that puts a stigma on business failure. Because so many new enterprises do fail, it's very difficult to induce professional managers to leave the security of corporate life to take a chance.
"The key engineering people here are not entrepreneurially minded," St. James's Hochauser said. "And in this country, with the pension system, there is no incentive to go out."
To try to get around that problem, Hochauser is trying to implement "corporate venturing" through which his fund will help to underwrite research and development along with a larger company. If the product is a success, his fund receives a piece of the proceeds. Or, if the large company decides to spin off the project into a separate company, St. James would own part of the new corporation -- an end result Hochauser prefers.
"We have this untapped engineering talent in big industry," Hochauser said. "This is one way to get at it."
There are similar problems in France and Germany, where corporate spinoffs are rare. "The French scientists don't have the same economic background as American and British scientists," Tschenio said. "They are removed from the business realities."
Moreover, neither France nor Britain has the same kind of aggressive collaboration between industry and academe that exists in the United States. Although European universities are doing state-of-the-art research in many high-technology fields -- including biotechnology and computers -- these institutions lack the close ties between professors and entrepreneurial companies commonly found at Stanford University or the Massachusetts Institute of Technology, for example.
"The key thing is that the top guys have got to be willing to quit to start their own businesses," Tchenio said. "And we're just starting to see that."
Peter Brooke, who runs TA Associates, one of America's largest venture firms, sees the emergence of "global venture capital," with American and European venture firms jointly funding the launch of international start-ups.
However, Brooke and other venture capitalists say that Europe's dream that venture capital will rejuvenate ailing economies is just that.
"There are always overexpectations for venture capital," Brooke said. "People have a funny way of thinking it will reshape their economic landscape. It's actually a long, long process."