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Over the past 25 years, the USA has pioneered a new technological revolution, based on large numbers of new small enterprises, financed by a dynamic venture (risk) capital market. The European Union, meanwhile, has lagged behind in this sector of economic activity, and compared to the US innovative small and medium enterprises appear to find it more difficult to get started and grow. At a time when regional and local banking systems -- traditionally major sources of capital for small and medium sized enterprises across Europe -- are undergoing intense reorganisation and restructuring, the European Commission considers the development of a substantial risk capital market to be a key condition for closing the 'enterprise gap' with the US. While the venture capital industry is much less developed in Europe than it is in the US, nevertheless it has recently experienced a marked increase in activity. But whereas the European Commission argues that venture capital activity needs to be much more regionally clustered if it is to emulate the US experience, the OECD and some EU member states have argued for a more even regional distribution. The aim of the paper is to chart the growth and geographical anatomy of the emerging European venture capital market, and to examine its spatial development and regional implications in the context of these somewhat opposing views. Copyright 2002, Oxford University Press.