Perspectives on Venture Capital October 11, 2007
Today’s Discussion: Perspectives on Venture Capital <ul><ul><li>Impact on US Economy </li></ul></ul><ul><ul><li>Impact on ...
Venture Capital Is a Major Force in the US Economy  Source: Venture Impact, 2007 – 2005 data Total  revenue  of Venture Ca...
Venture Capital Drives US Economic Growth By Creating Jobs and Revenue  Source: Venture Impact, 2007 Jobs Millions, Ventur...
Venture Capital Backed Companies Have Outperformed Their Non-Venture Counterparts Note: 2003-2005 GDP growth (nominal) was...
Venture Backed Firms Have Driven Revenue and Employment Growth Even During Economic Slowdowns Economic Slowdown : Employme...
Venture Capital is Not Just About Information Technology Source: Venture Impact, 2007
VC Job Creation Relative To Non-Venture Counterparts  is Even More Pronounced in Specific Industries Employment Growth in ...
Today’s Discussion: Perspectives on Venture Capital <ul><ul><li>Impact on US Economy </li></ul></ul><ul><ul><li>Impact on ...
Venture Capital Investment in Europe Has Driven Job Creation Source: EVCA Report, November 2005 Total  investment in 2004 ...
Job Growth in Venture Backed Companies Far Exceeded Overall European Job Growth * Estimated based on 2000-2004 data Source...
Highest Employment Growth in Biotech, Health Care, and Medical Device Industries Employment growth in European venture bac...
University Spinoffs Had the Highest Job Growth Employment growth in European venture backed companies, CAGR 1997-2004  Sou...
Venture Funded Firms Have a Strong R&D Focus Employee Mix % of total employees for European venture funded companies R&D S...
Today’s Discussion: Perspectives on Venture Capital <ul><ul><li>Impact on US Economy </li></ul></ul><ul><ul><li>Impact on ...
Many of Today’s Most Innovative Business Models Came From Venture Backed Companies However, raising VC funding remains a c...
How Can Countries Create a More Favorable Environment for Venture Capital <ul><ul><li>Provide tax incentives </li></ul></u...
Diaspora Can Have a Significant Impact Source: McKinsey Quarterly Leveraging the Diaspora  Nature of contributions <ul><ul...
Leveraging Diaspora for Entrepreneurship: TiE Example The Indus Entrepreneurs (TiE): world's largest not-for-profit organi...
Final Thoughts <ul><ul><li>Venture Capital is a local business </li></ul></ul><ul><ul><ul><li>Critical mass is key </li></...
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Venture Capital investment to promote entrepreneurship in ...

  1. 1. Perspectives on Venture Capital October 11, 2007
  2. 2. Today’s Discussion: Perspectives on Venture Capital <ul><ul><li>Impact on US Economy </li></ul></ul><ul><ul><li>Impact on EU Economy </li></ul></ul><ul><ul><li>Creating a favorable VC environment </li></ul></ul>
  3. 3. Venture Capital Is a Major Force in the US Economy Source: Venture Impact, 2007 – 2005 data Total revenue of Venture Capital backed companies: 16.6% of US GDP Total employment of Venture Capital backed companies: 9.0% of US Private Sector employment
  4. 4. Venture Capital Drives US Economic Growth By Creating Jobs and Revenue Source: Venture Impact, 2007 Jobs Millions, Venture Backed Companies Revenue USD Trillions, Venture Backed Companies Total US VC investment in 2005 = $23 billion (0.2% of US GDP)
  5. 5. Venture Capital Backed Companies Have Outperformed Their Non-Venture Counterparts Note: 2003-2005 GDP growth (nominal) was 13.5% (i.e., 6.5% CAGR) Source: Venture Impact, 2007 Recent Past : Employment and Revenue growth, CAGR 2003-2005 Employment Revenue Venture backed companies All companies
  6. 6. Venture Backed Firms Have Driven Revenue and Employment Growth Even During Economic Slowdowns Economic Slowdown : Employment and Revenue growth, CAGR 2000-2003 Employment Revenue Venture backed companies All companies Note: 2000-2003 GDP growth (nominal) was 11.7% (i.e., 3.7% CAGR) Source: Venture Impact, 2007
  7. 7. Venture Capital is Not Just About Information Technology Source: Venture Impact, 2007
  8. 8. VC Job Creation Relative To Non-Venture Counterparts is Even More Pronounced in Specific Industries Employment Growth in Leading Industry Sectors, CAGR 2003-2005 Financial Services Biotechnology Electronics / instrumentation Source: Venture Impact, 2007
  9. 9. Today’s Discussion: Perspectives on Venture Capital <ul><ul><li>Impact on US Economy </li></ul></ul><ul><ul><li>Impact on EU Economy </li></ul></ul><ul><ul><li>Creating a favorable VC environment </li></ul></ul>
  10. 10. Venture Capital Investment in Europe Has Driven Job Creation Source: EVCA Report, November 2005 Total investment in 2004 (€ billions) 10.3 Number of companies funded in 2004 5,557 Europe Venture Capital (2004) Total employment in all venture funded companies (# of employees, millions) ~1.0 Employment in venture funded companies as proportion of employment in DJ STOXX 600 companies ~5%
  11. 11. Job Growth in Venture Backed Companies Far Exceeded Overall European Job Growth * Estimated based on 2000-2004 data Source: EVCA Report, November 2005 Employment growth, CAGR 1997-2004 Venture backed companies Overall (EU – 25 countries)*
  12. 12. Highest Employment Growth in Biotech, Health Care, and Medical Device Industries Employment growth in European venture backed companies, CAGR 1997-2004 Source: EVCA Report, November 2005 Average = 30.5%
  13. 13. University Spinoffs Had the Highest Job Growth Employment growth in European venture backed companies, CAGR 1997-2004 Source: EVCA Report, November 2005
  14. 14. Venture Funded Firms Have a Strong R&D Focus Employee Mix % of total employees for European venture funded companies R&D Spending R&D expenses, € thousands per employee European VC backed companies are spending ~45% of expenses on R&D Work in R&D functions 33% Are researchers or engineers 26% Have a PhD 13% Source: EVCA Report, November 2005
  15. 15. Today’s Discussion: Perspectives on Venture Capital <ul><ul><li>Impact on US Economy </li></ul></ul><ul><ul><li>Impact on EU Economy </li></ul></ul><ul><ul><li>Creating a favorable VC environment </li></ul></ul>
  16. 16. Many of Today’s Most Innovative Business Models Came From Venture Backed Companies However, raising VC funding remains a challenge in most developing economies
  17. 17. How Can Countries Create a More Favorable Environment for Venture Capital <ul><ul><li>Provide tax incentives </li></ul></ul><ul><ul><ul><li>Encourage long term holding </li></ul></ul></ul><ul><ul><ul><li>Keep it simple </li></ul></ul></ul><ul><ul><ul><li>Unsuccessful attempts to learn from: Australia, South Africa </li></ul></ul></ul><ul><ul><li>Educate investors, particularly foreign investors </li></ul></ul><ul><ul><ul><li>India example </li></ul></ul></ul><ul><ul><li>Create critical mass </li></ul></ul><ul><ul><ul><li>Investment in university based research (e.g., on campus incubation) </li></ul></ul></ul><ul><ul><ul><li>Immigration laws </li></ul></ul></ul><ul><ul><ul><li>“ Ok to fail” mindset </li></ul></ul></ul><ul><ul><ul><li>“ VC zones” with supporting systems (e.g., Silicon Valley, Research Triangle Park) </li></ul></ul></ul>THEMES FOR DISCUSSION
  18. 18. Diaspora Can Have a Significant Impact Source: McKinsey Quarterly Leveraging the Diaspora Nature of contributions <ul><ul><li>Remittances and investment </li></ul></ul><ul><ul><ul><li>In 1999, 70% of China FDI came from Chinese people living abroad </li></ul></ul></ul><ul><ul><ul><li>Silicon Valley Indians “seeding” startups in Bangalore & Hyderabad </li></ul></ul></ul><ul><ul><li>Knowledge and intellectual capital </li></ul></ul><ul><ul><ul><li>Advise to government (e.g., policy to encourage venture capital, deregulation of industries) </li></ul></ul></ul><ul><ul><ul><li>Financing of elite educational institutions </li></ul></ul></ul><ul><ul><ul><li>Business internships and exchange programs </li></ul></ul></ul><ul><ul><li>Create emigrant networks </li></ul></ul><ul><ul><ul><li>Professional </li></ul></ul></ul><ul><ul><ul><li>Economic </li></ul></ul></ul><ul><ul><ul><li>Educational </li></ul></ul></ul><ul><ul><ul><li>Social </li></ul></ul></ul><ul><ul><li>Facilitate information flow </li></ul></ul><ul><ul><ul><li>Communication infrastructure </li></ul></ul></ul><ul><ul><ul><li>E.g., database of expats, information on investment opportunities </li></ul></ul></ul><ul><ul><li>Provide incentives </li></ul></ul><ul><ul><ul><li>Financial: E.g. Foreign currency deposits, removing restrictions on profit repatriation </li></ul></ul></ul><ul><ul><ul><li>Other: High profile awards </li></ul></ul></ul>
  19. 19. Leveraging Diaspora for Entrepreneurship: TiE Example The Indus Entrepreneurs (TiE): world's largest not-for-profit organization for entrepreneurs <ul><ul><li>Founded in 1992 in Silicon Valley by a group of successful entrepreneurs, corporate executives, and senior professionals with roots in the Indus region </li></ul></ul><ul><ul><li>Currently 12,000 members in 45 chapters across 10 countries </li></ul></ul><ul><ul><li>Mission: foster entrepreneurship globally through mentoring, networking, and education </li></ul></ul><ul><ul><li>Achievements: </li></ul></ul><ul><ul><ul><li>Largest pool of intellectual capital anywhere </li></ul></ul></ul><ul><ul><ul><li>Brand globally synonymous with entrepreneurship </li></ul></ul></ul><ul><ul><ul><li>Annual conference, TiECon, regarded largest entrepreneurial forum in the world </li></ul></ul></ul><ul><ul><ul><li>Helped boost the economies of the communities in which it operates </li></ul></ul></ul><ul><ul><ul><li>Economic wealth creation estimated at $200 billion </li></ul></ul></ul><ul><ul><ul><li>Significant involvement in social entrepreneurship </li></ul></ul></ul><ul><ul><ul><li>Influenced liberalization of key economic sectors in India and Pakistan </li></ul></ul></ul>
  20. 20. Final Thoughts <ul><ul><li>Venture Capital is a local business </li></ul></ul><ul><ul><ul><li>Critical mass is key </li></ul></ul></ul><ul><ul><ul><li>It is not technology </li></ul></ul></ul><ul><ul><li>Leverage Diaspora </li></ul></ul><ul><ul><ul><li>Build networks </li></ul></ul></ul><ul><ul><ul><li>Facilitate information flow </li></ul></ul></ul><ul><ul><ul><li>Provide incentives </li></ul></ul></ul>

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