Venture Capital  and  U.S. Trade Competitiveness Karen G. Mills [email_address] April   4, 2005 Council on Foreign Relatio...
How does innovation translate into  American jobs? DISCOVERY Basic Research Invention Innovation Commercialization Growth ...
Each quarter the U.S. economy creates  over 7 million jobs Source: Bureau of Labor Statistics, U.S. Department of Labor Mi...
New jobs come from business expansions  and from newly formed firms Source: Bureau of Labor Statistics, U.S. Department of...
The United States is losing manufacturing jobs Source: U.S. Department of Labor, Bureau of Labor Statistics Year Millions
Job losses and job creation are influenced  by different forces Job Creation <ul><li>New business openings </li></ul><ul><...
New firms and the expansion of small  businesses create most of the jobs Source: Small Business Administration; MMP Analys...
Entrepreneurs launch over 500,000 new  firms annually Source: U.S. Department of Labor, Bureau of Labor Statistics
Successful Venture Capital backed  businesses have a large economic impact <ul><li>1970-2003 Venture Capitalists invested:...
Growth capital transforms innovation into commercial enterprises and jobs <ul><li>Private Equity </li></ul><ul><li>Bank De...
Over $250 billion is currently in the hands  of U.S. Venture funds Capital Commitments to  U.S. Venture Funds ($ Billions)...
Venture Capital backed companies grow faster and create more jobs Venture Backed Growth 2000-2003 Percentage Change 12% 7%...
This growth occurred in a number of  important industries Source: National Venture Capital Association; Global Insights st...
Venture capital funding spurs innovation more powerfully than R&D *  Innovation is measured by patent production Source: S...
The Small Business Innovation Research (SBIR) Program had similar results Source: J. Lerner, Harvard University and Nation...
Venture intensive industries had higher  wage growth Wage Growth 2000-2003 Venture Intensive Industries Non-Venture Intens...
Private equity now funds the growth of private companies at all sizes and stages Start up/Seed Early Stage Later Stage Gro...
Last year $57 billion was invested in  Private Equity Source: 2004 NVCA Year Book
Buyouts and Mezzanine Capital is also being used to grow businesses Source: 2004 NVCA Year Book Other Private Equity Capit...
Institutions not individuals provide  most of the funds Source: 2004 NVCA Year Book
Conclusion: Venture Capital and U.S. Trade Competitiveness  <ul><li>America’s spirit of entrepreneurship, entrepreneurial ...
Karen Gordon Mills Karen Gordon Mills was a Founder and Managing Director of Solera Capital, a private equity fund based i...
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Karen Mills: Venture Capital and U.S. TradeCompetitiveness

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Karen Mills: Venture Capital and U.S. TradeCompetitiveness

  1. 1. Venture Capital and U.S. Trade Competitiveness Karen G. Mills [email_address] April 4, 2005 Council on Foreign Relations How Does Innovation Translate Into American Jobs?
  2. 2. How does innovation translate into American jobs? DISCOVERY Basic Research Invention Innovation Commercialization Growth BUSINESS FORMATION JOB CREATION <ul><li>Growth Capital and Expertise </li></ul><ul><li>Small Business </li></ul><ul><li>Entrepreneurship </li></ul>
  3. 3. Each quarter the U.S. economy creates over 7 million jobs Source: Bureau of Labor Statistics, U.S. Department of Labor Millions
  4. 4. New jobs come from business expansions and from newly formed firms Source: Bureau of Labor Statistics, U.S. Department of Labor Millions
  5. 5. The United States is losing manufacturing jobs Source: U.S. Department of Labor, Bureau of Labor Statistics Year Millions
  6. 6. Job losses and job creation are influenced by different forces Job Creation <ul><li>New business openings </li></ul><ul><li>Business expansions </li></ul><ul><ul><li>Small business </li></ul></ul><ul><ul><li>Venture backed businesses </li></ul></ul>Job Losses <ul><li>Business Closures </li></ul><ul><li>Productivity </li></ul><ul><li>Offshore transfers </li></ul>
  7. 7. New firms and the expansion of small businesses create most of the jobs Source: Small Business Administration; MMP Analysis Percent of Total New Jobs Created by Firm Type 1991-2001 New Firms Small Firm Expansion <20 Employees Small Firm Expansion 20-500 Employees Total New Jobs New/Small Firms 18% 24% 61% 19%
  8. 8. Entrepreneurs launch over 500,000 new firms annually Source: U.S. Department of Labor, Bureau of Labor Statistics
  9. 9. Successful Venture Capital backed businesses have a large economic impact <ul><li>1970-2003 Venture Capitalists invested: </li></ul><ul><ul><li>$340 billion invested </li></ul></ul><ul><ul><li>21,600 companies </li></ul></ul><ul><li>VC backed companies represent 9% of total U.S. jobs and revenues </li></ul><ul><ul><li>10.1 million jobs </li></ul></ul><ul><ul><li>1.8 trillion in revenues </li></ul></ul>
  10. 10. Growth capital transforms innovation into commercial enterprises and jobs <ul><li>Private Equity </li></ul><ul><li>Bank Debt </li></ul><ul><li>Personal Savings </li></ul><ul><li>Corporate Profits </li></ul>DISCOVERY <ul><li>R&D Funding </li></ul><ul><li>University Support </li></ul><ul><li>Government </li></ul><ul><li>Public Equity </li></ul><ul><li>Public Debt </li></ul><ul><li>Company Profits Reinvested </li></ul>Basic Research Invention Innovation Commercialization Growth BUSINESS FORMATION JOB CREATION
  11. 11. Over $250 billion is currently in the hands of U.S. Venture funds Capital Commitments to U.S. Venture Funds ($ Billions) Source: NVCA Yearbook Capital Under Management U.S. Venture Funds ($ Billions)
  12. 12. Venture Capital backed companies grow faster and create more jobs Venture Backed Growth 2000-2003 Percentage Change 12% 7% -2% 7% 5 pp 9 pp Sales Growth Job Growth Source: National Venture Capital Association; Global Insights study Venture Backed Total U.S. Venture Backed Total U.S.
  13. 13. This growth occurred in a number of important industries Source: National Venture Capital Association; Global Insights study Semiconductors Computer Hardware and Services Industrial/Energy Business/Financial Communications Healthcare Services Retailing and Media Healthcare Products Computer Software Biotechnology Employment Growth at Venture Capital Backed Companies vs. Total by Industry Sector (2000-2003)
  14. 14. Venture capital funding spurs innovation more powerfully than R&D * Innovation is measured by patent production Source: Samuel Kortum and Josh Lerner, RAND Journal of Economics, Winter 2000 VC Spending as a percent of R&D (1983-1992) Percent of Industrial Innovation* accounted for by VC Backed Firms (1983-1992) Percent accounted for in 1999
  15. 15. The Small Business Innovation Research (SBIR) Program had similar results Source: J. Lerner, Harvard University and National Bureau of Economic Research Note: The SBIR program provided $7 billion to small high technology firms between 1983 and 1997
  16. 16. Venture intensive industries had higher wage growth Wage Growth 2000-2003 Venture Intensive Industries Non-Venture Intensive Industries
  17. 17. Private equity now funds the growth of private companies at all sizes and stages Start up/Seed Early Stage Later Stage Growth Capital Mid Market Buyout Large Buyout $3-10 mil $500+ mil $100-500 mil $50-100 mil $10-50 mil Average Investment $0-3 mil Venture Capital Buyout/Mezzanine
  18. 18. Last year $57 billion was invested in Private Equity Source: 2004 NVCA Year Book
  19. 19. Buyouts and Mezzanine Capital is also being used to grow businesses Source: 2004 NVCA Year Book Other Private Equity Capital Buyouts and Mezzanine Capital Venture Capital
  20. 20. Institutions not individuals provide most of the funds Source: 2004 NVCA Year Book
  21. 21. Conclusion: Venture Capital and U.S. Trade Competitiveness <ul><li>America’s spirit of entrepreneurship, entrepreneurial capital and expertise are important competitive assets </li></ul><ul><li>Private equity is a major new source of growth capital and expertise that did not exist in this fashion 20 years ago </li></ul><ul><li>This risk capital plays a disproportionately important role in driving economic growth </li></ul>
  22. 22. Karen Gordon Mills Karen Gordon Mills was a Founder and Managing Director of Solera Capital, a private equity fund based in New York City. She has been in the industry since 1983 and is an expert in investing and growing companies in traditional U.S. based industries such as food, textiles, media and industrial components. Some of these companies and brands include Telex Communications, Mrs. Fields Cookies, Bruce Hardwood Floors and Annie’s Macaroni and Cheese. Her background also includes consulting for McKinsey & Co. and product management at General Foods. Ms. Mills received her A.B. from Harvard University in Economics in 1975 and her MBA from Harvard Business School in 1977, where she was a Baker Scholar. She currently serves on the Boards of the Scotts Company and Arrow Electronics and is Vice-Chair of the Harvard Overseers.

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