EVCA’s New Voice on Policy

Signaling a moment of change in the European investment community, Dörte Höppner in early 2011 took over as secretary general at the European Private Equity & Venture Capital Association (EVCA) from the outgoing Javier Echarri, who left after 10 years at the helm to become director of GED Iberian Private Equity.

Höppner, 45, previously headed BVK, the German VC and PE association. Yet her involvement with the Europe-wide EVCA goes back several years. She has been on its 12-member public affairs committee since its inception and has long played a central role in European financial affairs.

Höppner, who began her career in broadcast journalism, is a tall, attractive blonde. She radiates openness, attention to detail and willingness, even eagerness, to find collaborative solutions to the issues vexing the 1,300 members of the EVCA.

And there are plenty of issues. The European sector currently faces multiple concerns, from policymakers, troubled local economies and the continued fallout from the 2008 financial crisis.

The Alternative Investment Fund Managers (AIFM) Directive, currently being implemented by European countries, is just one example of new regulations that could impinge the ability of private equity and venture capital firms to operate.

Further new pensions regulations and the Solvency II measures mean that the industry could experience a sustained period of instability and reduced returns.

During a brief trip to London, Höppner spoke to VCJ contributor David Nicholson at her hotel in Mayfair. Here’s an edited version of how the conversation went:

Q: The current situation in Europe has been described as a wave of new regulation. Does it feel like that?

A:

We live in a world that is full of regulation, and regulation makes a lot of sense, because everybody needs to know what the rules are. And we are in an industry where institutional investors have a very high interest in investing in a regulated industry. So regulation per se for me is not negative. Our job is about explaining our industry to the policymakers, pointing out what we can do to overcome the current crisis, and offering help to come up with an appropriate piece of regulation.

Policymakers, obviously want to have better control or supervision of the financial markets, and we want to make sure that we can keep our business model and continue to attract investment from institutional investors, and put that capital into European companies. And I think so far it has proven to be the right approach.

Q: What are your thoughts on the AIFM Directive currently being implemented?

A:

There will be an AIFM Directive, and it is very unfortunate that private equity got caught in this directive, since it was much more meant for hedge funds. The venture capital and private equity industry didn’t have any part in the financial markets crisis.

These extra regulations mean that extra efforts have to be made by the industry—they will not only report to the institutional investors but also now to the national supervisory authorities. That’s new and nobody likes it, but it’s manageable.

Q: And the AIFM is just one regulation. How is the industry being affected by other policies?

A:

Of course it’s not only the AIFM Directive that we are dealing with, it’s also Solvency II [regulatory requirements for insurance firms that invest within the European Union]. it’s also the pensions directive, and all these regulations came up because of the financial market crisis.

We have to make sure that policymakers, not only in Brussels but throughout the national capitals, can see the benefits of our industry, that they see what venture capital and private equity industries can do, for the growth of European companies to finance innovative businesses.

The problem is that there’s a certain mismatch between the policymakers who are in charge of Solvency II. I’m not sure whether they’re aware yet that Solvency II will have a massive negative effect on venture capital investment. Or that an insurance company, for example, will have to underpin their investment in venture capital with much more equity.

On one hand, policymakers want to promote private equity and venture capital, but on the other hand they put policies in place that contradict the project. We have to point that out, we have to massively increase our communication, to make sure that they’re all aware of the effects of their actions.

Q: How does your background in communications play into your new gig?

A:

Everyone can find out what we have done in Germany in regards to reputation-building, communicating, sending out messages, becoming a respected dialogue partner to policymakers. That’s the way that it works across Europe—you make policy not by shouting and screaming, it’s about getting respect, it’s about passing along information, and that’s the great thing about this industry.

That’s why I like it so much. The more you know about investing, the more you’re convinced that it is really important for the overall economy.

Q: What kind of problems does it pose when policymakers, people at the highest level, confuse hedge funds with private equity?

A: That’s why we need to educate them. Things are getting better. They’re better now than they were four years ago. The difference between private equity and hedge funds has been made clearer and more policymakers understand it, but I totally agree with you that the general public probably haven’t a clue what the industry is all about.

The objective is at least that when they hear the words “private equity” or “venture capital,” they don’t have a negative association, but a positive one.

Q: How do you see the industry changing in the next five years?

A:

Well, I’m hoping that it will become even more transparent, that communication will pick up speed. I hope that in five years, people understand our industry much better and that it has also become more transparent.

I mean there’s nothing to hide, we are very transparent in a lot of things we do, and in others we aren’t, but not any less transparent than other industries.

We have a fantastic industry with an outstanding governance model; this is a most important factor. We could certainly be more proactive to show the world what we’re about.

Q: Should venture-backed companies receive government support?

A:

The ultimate goal is to have a venture capital community with private funds and institutional investors, not dependent on government money.

But without any government intervention, the venture capital market wouldn’t function. There is what we can call a “market inefficiency.”

If you look at the United States, venture capital has been heavily dependent on state funding. Or if you look at Israel, which has the highest amount of venture capital activity in comparison to its GDP, there is very heavy state aid.

States like to get involved in venture capital because governments worldwide say that it has an important role in financing innovation. It shouldn’t become a permanent subsidy, but companies should stand on their own two feet.

Once Europe has the same track record as the United States, it will be easier. In 10 years time it will be a different picture. Venture capital is a very special asset class: you need a particular mind set on the institutional investor side. Besides, if you took away venture capital, the whole financing of innovative companies would be left to the government.

Q: Would you like to see more women in the industry?

A: Yes. But this is true across the whole financial industry. There are always more men than women.

Probably women have too much respect, or they’re too scared, when they see so many men working in the sector. It’s about coming up with role models. If you look at [EVCA Chairperson] Uli Fricke, for example, she is a great role model. She is an actual venture capitalist. Or Anne Glover [CEO of Amadeus Capital Partners].

Q: Or you?

A:

I never had the sense of walking into a room full of men and feeling that it’s strange that I’m a woman. Quite the opposite, or else I wouldn’t be here.

BIOGRAPHY

Dörte Höppner

grew up in Berlin and studied for a master’s degree in the German capital, where she wrote a dissertation on pan-European competition law, concluding that southern European states favored creating national champions while northern states preferred to foster competition.

After graduating, Höppner ran the communications department at the think tank the German Institute of Economic Research, before being appointed managing director at BVK, the German venture capital and private equity association.

Married to a TV sports reporter, she has three children; the oldest is currently studying at Magdeburg University. The family lives in Berlin while she commutes between the city and Brussels, where she works during the week.

A keen sportswoman, both as a participant (running and skiing, for example), she is also an enthusiastic football fan, supporting her home team of Hertha Berlin.

When on vacation, she travels widely, recently visiting Egypt (just before the riots), the United States and Sweden.