Investing and Operating in EU (with domicile in Delaware)
What are the requirements for European GPs opening a fund in Europe, even with domicile of fund in Delaware? Is there a need for a specific license to operate and invest in the EU?
European GPs (General Partners) looking to fundraise in Europe, even with the domicile of the fund in Delaware, face a complex regulatory environment. When pitching EU limited partners before the fund is launched, manager must adhere to the Alternative Investment Fund Managers Directive (AIFMD), which regulates pre-marketing activities. A key pre-marketing strategy in the EU is reverse solicitation.
Reverse solicitation in the EU context requires that the initial request for materials be made by the investor or limited partner, without the manager explicitly pitching the fund. The fund manager must document this investor-initiated contact and limit their response to the specific request of the investor. For example, a prospective limited partner may ask the manager if they are launching a fund, and then the manager can share fund-related information.
EU fund managers often domicile their funds in the US for a more favorable regulatory framework. If a manager chooses to domicile in the EU, they must either obtain the European Venture Capital Funds (EUVECA) designation or adhere to the individual laws of EU member states where they have limited partners.
Due to high regulatory and compliance costs in the EU, it does not make sense to place a fund in the EU that is less than $15 MM in size. Additionally, it can take over a year to get the basic approvals and licenses.
See: https://govclab.com/2023/12/14/eu-fundraising-for-new-managers/
Reverse solicitation in the EU context requires that the initial request for materials be made by the investor or limited partner, without the manager explicitly pitching the fund. The fund manager must document this investor-initiated contact and limit their response to the specific request of the investor. For example, a prospective limited partner may ask the manager if they are launching a fund, and then the manager can share fund-related information.
EU fund managers often domicile their funds in the US for a more favorable regulatory framework. If a manager chooses to domicile in the EU, they must either obtain the European Venture Capital Funds (EUVECA) designation or adhere to the individual laws of EU member states where they have limited partners.
Due to high regulatory and compliance costs in the EU, it does not make sense to place a fund in the EU that is less than $15 MM in size. Additionally, it can take over a year to get the basic approvals and licenses.
See: https://govclab.com/2023/12/14/eu-fundraising-for-new-managers/