Europe has sought economic integration since World War II for very good reason: size confers advantages that can't be captured in small markets. This is as true in markets for capital as it is for markets in goods and services.

Until now, and for reasons that are often specific to each country, there has been limited private and public capital available in Europe, which has hindered the development of high-risk, growth-oriented sectors such as biotech.

In contrast, the success of the NASDAQ stock market in the U.S. in bringing close to 300 biotech companies and a plethora of tech companies public, together with a vibrant venture community, has served as an example of what might be. The result has been a renewed push in Europe to develop capital structures supportive of growth companies.

Most prominent among those efforts has been Brussels-based EASDAQ (European Association of Securities Dealers Automated Quotation). But there are also several country-based markets, including Chapter 20 of the London Stock Exchange and the Alternative Investment Market (AIM) in London, the Nouveau Marche in France, and a market under consideration in Germany.

To date, the development of EASDAQ has been driven by the sellers of equities, including venture investors and banks - rather than by companies and buyers of public equity (see list of investors, A3). To be successful, the exchange and its backers will have to convince companies that EASDAQ is a better alternative than the London Stock Exchange and NASDAQ. And it will have to convince public investors that there will be sufficient liquidity and companies of quality to lure their interest, as well as analyst coverage to support valuations.

Conversations with venture and institutional investors, companies and investment bankers reveals great enthusiasm for the concept of a pan-European market. But most, including some who have actually invested in EASDAQ, plan to take a wait-and-see attitude towards the new market in practice.

Making a case