PRINT THIS PAGE

Venture capital is key to US economic growth, says study

Venture capital is one of the most important drivers of economic growth in the US, a study commissioned by the National Venture Capital Association claims.

The study, conducted by research house DRI-WEFA, has found that venture-backed companies financed between 1970 and 2000 reported around twice the sales, paid almost three times the federal taxes, generated almost twice the exports and invested almost three times as much in R&D as the average non-venture-backed company.

The analysis also showed that these growth companies were not just confined to high technology - the area most people associate with venture capital. The study claims that venture capital has been responsible for innovation across a large spectrum of sectors including biotechnology, consumer products, retailing, construction and forestry.

The timing of the report couldn't be better for the industry. With many investors and observers sceptical about venture capital following the boom and subsequent downturn, the claim that VC is good for the economy could provide a much-needed fillip to the industry. ‘At a time when Americans are concerned about the nation's economic recovery, understanding the key sources of economic growth has never been more important,' said Anna Eshoo of the Congressional Economic Leadership Institute, which is sponsoring the report. ‘This study shows that venture capital is one of the key ingredients to fuel our economic engine, one that differentiates us from other developed economies whose job creation has not kept pace with ours.'

The European Private Equity and Venture Capital Association recently published a similar study into the economic impact of venture capital, which found that many companies believed they would not have been in existence or would not have grown so fast without venture backing.

Copyright © 2002 AltAssets