When you think of venture capital/private equity investing, what’s the first place that comes to mind? If you’re like most, you probably think of Silicon Valley’s tech companies or biotechnology in Massachusetts, as places with a strong venture capital base. You’d be right. On an absolute dollar basis, venture capital in the United States is still the top place in the world, and by a large margin. Here’s the graph to prove it.
Sometimes, though, it’s useful to look at the figures on a relative basis. By doing this, it may give us an idea of where things are heading. Here’s a map of venture capital investments by GDP. The green countries are the countries with high venture capital to GDP ratios, while the dark red countries are the countries with relatively little venture capital investments as a percentage of GDP.
Perhaps unsurprisingly to some, the United States is still close to the top, along with some northern European countries, Canada, South Africa, South Korea, and Israel. But, who’s on top? The table following the map has the answer.
Another Look at Venture Capital Investments as a Percentage of GDP
Here’s another look at venture capital investments as a percentage of GDP. Interestingly, on a percentage of GDP basis, venture capital investing in Israel is tops, at an amazing 27%. Other members of the top 5 include United States (10%), South Korea and South Africa (6%), and Canada (5%).
On the other end, venture capital investing represents an incredibly small portion of GDP in Greece (0.01%), Italy (0.16%), Czech Republic (0.19%), Slovak Republic (0.23%), and Poland (0.23%).
Some of these countries are quite unsurprising. It’s long been known that the young, just-entering-the-workforce Greek citizen has long had the desire to enter government or other bureaucratic employment. Italy, although somewhat better, is not too much different. This attitude, unsurprisingly, shows up in venture capital figures. Perhaps the debt Greek debt crisis and slow economic growth is starting to change that mindset.
Changes in Recent Years
With the previous discussion as the background, how have things changed over the past few years? Here’s a look at venture capital investment growth from 2007 to 2014. The figure is set relative to 2007; essentially, every country’s venture capital investment to GDP ratio is set at 100 in 2007. If the figure below is above 100, that means that venture capital to GDP grew since 2007. If the figure is below 100, then venture capital to GDP declined since 2007. Fascinatingly, a different picture emerges.
The top graph represents where thing grew to or declined relative from 2007 to 2009. The bottom graphic capture the period 2007 to 2014. Both represent the venture capital to GDP ratio.
On top in 2009 was Russia at 114.3. The 114.3 means that venture capital as a percentage of GDP was 14.3% more in 2009 than in 2007. In second place was Austria at 96.4, followed by Ireland at 89.6, Belgium at 87.5, and France at 83.5.
On the other end, venture capital as a percentage of GDP collapsed in Poland (down to 3.0), Hungary (12.1), Portugal (33.8), New Zealand (35.3), and Denmark (40.2).
The 2014 picture looks somewhat different. Hungary shifted to the top, at 296.9, followed by South Africa at 275.4, Russia at 231.5, and the United States at 154.5.
Conclusion
In looking at venture capital across countries, VC business headquartered in the United States continues to be a large portion of the global venture capital pie. And yet when taking a slightly different view, growth in venture capital is growing quickly in Russia, South Africa, and select European countries.
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