Venture Capital Worldwide
Even though a large number of venture capital deals are completed in the United States, the non-US VC community is expanding exponentially.
Worldwide VC serves as a tool for economic development, as many emerging countries progress in their growth, expansion and modernization. In many regions, such as India, VC funding seems to be one of the only ways a large enterprise can be successfully launched.
The past four years (2008-2011) has seen between a 5-10 percent increase in VC fundings outside of the United States with the majority of these fundings occurring in both Europe and China. It’s a fact that differences in styles and types of business investment between countries are enormous. For example, approximately 1/3rd of business investment in the United States is funded through VC, while less than 5 percent of England’s business investment is provided by VC. Much of the inherent differences may be attributed to the different political systems.
The US is typically considered very pro-business while England is less so.
Canada provides generous tax benefits to Canadian technology companies through its Scientific Research Development investment tax credit (See SR&ED tax credit program). This tax incentive has increased VC fundings in the technology field through out Canada and requires only that 50 percent of a company’s owners be Canadian. This tax credit is extensive and is creating employment rapidly through the country.
Europe has an active and rapidly expanding VC community and, not surprisingly, according to The European Venture Capital Association the top three countries receiving funding are Germany, France, and the United Kingdom.
If we look all VC activity around the world we get a better perspective of where big activity is taking place.
* China does the most VC activity so we will call them 100%.
* United States does 23.18% of what China does.
* UK does 4.66% of what China does.
* France does 4.87% of what China does.
* Germany does 6.08% of what China does.
* Israel does .58% of what China does.
Realize that although these countries are very important in the world, each of these countries are fairly small, both geographically and population wise, compared to countries such as the United States or China.
By surveying the population numbers it is clear that China has enormous VC possibilities as the country continues to emerge in the world economy.
Truly, it is a large world with an outstanding opportunity presenting itself out there.
— Asia —
India is fast growing in the VC world, with technology companies emerging rapidly in the seed and start-up arena, where projects are funded through a combination of equity and loans.
Ventures in India in 2012 are consider far riskier than most other countries, including all of Europe and the United States. As a result, the economic rewards of VC in India must be very high when a project does come to fruition.
China is a communist country with a fledging VC industry. In communist countries everything can easily be taken and is considered owned by the government. However, as trade expands, VC money is becoming more important to the country’s prosperity.
Although typically considered by most to be a communist country, Vietnam has just started feeling the power of venture capital. Had the United States won the Vietnam War, which ended in 1975, an argument can be made that Vietnam would have experienced the value of free enterprise much sooner.
These countries are considered part of southern Africa: Angola, Botswana, Democratic Republic of the Congo, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia, and Zimbabwe (formerly Rhodesia).
Political instability has and will continue inhibiting external and internal VC funding in all of southern Africa. The primary country that could receive outside VC funding in southern Africa is South Africa– but still, instability–not just political– is a concern.
The unemployment rate in South Africa during the first quarter of 2012 was 25.2 percent. This number peaked in 2003, hit a low in 2008, and ever since– the unemployment has risen and remained fairly constant.
As political stability increases, VC funding will slowly expand businesses in South Africa which will assist in providing general prosperity in South Africa, as business expansion aids in providing employment.