VCs push for US-style rules to cut cost of launching UK funds

A coalition of UK investors, including Atomico, Entrepreneurs First, and Seedcamp, is urging the government to implement a US-style regulatory exemption for small venture capital funds. The investors argue that the current regulatory framework is hindering the establishment of new investment firms.

According to Invest Europe, the trade association for European private equity and venture capital, and UK investors, the US has a regulatory exemption that "allows for a faster and cheaper launch".

The campaign highlights that the cost of launching a fund in the US ranges from approximately $5,000 to $7,000, representing only 10-15% of the costs associated with launching a fund in the UK. This disparity is significant, considering the average fund size in the US is around $250 million, compared to $95 million in the UK.

The current UK regulatory regime requires substantial administrative efforts to launch a fund, incurring costs of thousands of pounds. Investors contend that this poses a barrier for smaller investors and nascent funds seeking market entry.

Signatories to the campaign, such as Ada Ventures, Antler, Atomico, Cavalry Ventures, Episode 1 Ventures, and Frog Capital, believe that adopting a US-like regulatory approach would significantly facilitate the creation of smaller funds, thereby fostering innovation and economic growth.