Impact & Benefits Venture Capital

Venture capital make your firms grow.

It is well known that for our SME's to compete in the global marketplace, they must acquire a larger size.

This is one of the most common main conclusions of most impact reports in different countries: venture capital gets multiplied the turnover and gross in its subsidiaries, on the other hand, the operations of "build up "common in this sector, accelerate the process of growth in the size of companies.

Venture Capital contributes to job creation.

In the venture capital backed companies’ job creation multiply up to 10 times, depending on the stage of development of the company. The younger the company, greater job creation.

Venture Capital encourages investment.

Venture Capital investment accelerates in tangible and intangible assets, contributing to investment are to grow beyond what could be the only company to be financed with internally generated resources.

Venture Capital thinks "future" by investing in innovation.

Significantly increases the number of patents registered in companies financed by venture capital, and the products of these companies get to market faster. Innovative sectors such as medicine, biotechnology and energy have shown growth more employment and higher turnover than other sectors.

Venture Capital accelerates internationalization.

Companies can no longer be "local" but "global" should have access to international markets if they want to survive and grow.

The internationalization experience, contacts and lower risk aversion of investors in venture capital allows companies to take the necessary step to become global.

Venture Capital reduces the rate of business failure.

There is a significant difference in the percentage of failed businesses: Private Equity firms get stronger and more likely to survive over time.

Venture Capital improves productivity.

The improvements made by Venture Capital translate into an increase on the productivity and efficiency of investee companies.

Venture Capital is a socially responsible investor.

Its aim is to excellence, is a responsible investor seeks to maximize financial and non-financial performance.

An example of how venture capital creates economic and social impact in the companies it invests in the case of Green Power Technologies owned by CDTI (Spain) between 2004 and 2009. During this period, the number of employee’s step 7-103 and sales increased from 0.27 to 25 million euros. The level of expenditure on R & D usually high in the company, reached its peak in 2009 with 1.64 million euros. One focus of growth was the internationalization of the company, which resulted in specific actions to enter the markets of countries like Costa Rica, Senegal, China, USA, UK, Morocco and Chile, among others.

In aggregate, the portfolio of investee companies of venture capital in the UK employs more than 3 million people, equivalent to 21% of all workers in the private sector.

In the whole of Europe (EVCA, 2005), Venture Capital entities created one million new jobs in the period 2000-2004. This figure equates to a growth rate of 5.4% per year, well above the rate of job creation of the entire European Union, located in the 0.7% according to Eurostat.

Venture Capital contributes to job creation.

This growth is triggered in the case of companies that are starting their activity. European companies funded by venture capital in early stages created jobs at an average rate of 30.5% annually. The sectors that contributed most to this increase were: biotechnology and medical products and services. In the investment of university spinoffs job creation grew 62% per year.

According to the European Association (EVCA, 2002), each seed stage company or venture capital-backed start think an average of 46 new jobs following the entry of venture capital investor.

Venture Capital encourages investment.

Academic studies have gone beyond the sales and employment growth, ensuring that the participating companies invest more and, more importantly, its investment activity ceases to be conditioned by the ability to generate resources internally.

In France and the UK, and Stiebale Engels (2009), studying the level of investment and the dependence of this with respect to internally generated resources in expansion stage companies in the 1998-2007 period. In France, the sample consists of 18,085 firms, of which 1,434 received venture capital in the expansion phase. In the UK, the sample consists of 7,543 companies of which 564 were in the expansion phase.

Their results found that in both countries, companies receiving venture capital investing more after the input of the inverter and also reduce the dependence on investment with respect to internal resource generation.

In Italy, Bertoni, Colombo and Croce (2010) studied the evolution of 379 technology-based companies, of which 52 received venture capital. Their results show that the latter have a higher investment rate than non-venture capital investees and also the inverter input Venture Capital is a reduction of dependence between investment and its ability to generate funds internally.

In Spain, Bertoni, Ferrer and Martí (2012) analyze the evolution of investment and the existence of financial constraints on growth companies belonging 246 low and medium sectors that received venture capital technology between 1995 and 2004. Their results find that their investment activity longer limited by the capacity to generate resources internally, as was the case before the inverter input.

Venture Capital thinks "future" by investing in innovation.

The investment made by the venture capital firms targeting are in their early stages in technology sectors is increasing. In 2011, in Spain were financed through venture capital investing a total of 581 technology companies, of which 417 were at an early stage in their activity. With this infusion of capital, the various impact studies reviewed reveal the growth experienced by the main economic variables of these companies and specifically its momentum in investment in R & D and therefore innovation.

In the U.S., Kortum and Lerner (2000) find that there is a clear relationship between investments in R & D financed by Venture Capital and the number of patents registered: $ 1 invested in R & D by an entity of Venture Capital is 3 times more $ 1 invested cash by a corporation.

In Germany, Engels and Keilbach (2007) confirm that firms that received venture capital registered more patents and grew more companies do not venture capital investees.

In Italy, Bertoni, Croce and D'Adda (2010) compared the patenting activity in 351 companies, of which 33 received venture capital, finding that it was different before the inverter input, but that once were invested by Venture Capital increased their patenting activity against the rest.

In the UK, according to EVCA (2008), companies invested by the Venture Capital, increased its annual investment by 14% and R & D spending grew by 12%, compared with annual increases of 3% level and 1%, respectively.

In Europe, according to the EVCA (2002), more than half of venture capital investments in companies that were in seed and start-up phase, from the inverter input multiplied by four venture capital investment in R & D and as a sample of this spending increase amounted to 370%.

Investment in R & D financed by venture capital increases the generation of patents, as well as its quality, an example of this is the Spanish company FRACTUS (owned by ENISA: National Innovation - Spain), who led much of the Venture capital funding towards investment in R & D, generating over 500 patents and patent applications in Europe, America and Asia. This effort to FRACTUS positioned itself as the second Spanish company, surpassed only by THE CSIC ranking for patents filed in the U.S. in the period 2004-2008

Venture Capital improves productivity.

Through the analysis of productivity is possible to quantify the value added by venture capital investors, beyond the necessary financial support. Therefore, although the undoubted effect on growth per se and justifies the role of venture capital, for its contribution in covering the funding gap called smaller companies, some academic work beyond analyzing the improvement in this variable .

In the U.S., Chemmanur, Krishnan and Nandy (2011) analyze the efficiency, measured through the total factor productivity (TFP) in a large sample of industrial companies unlisted supported and not supported by venture capital between 1972 and 2000. The sample is taken by about 1,800 companies that received venture capital and its corresponding control group. Their results found that the efficiency increases significantly more in companies backed by venture capital from the investment.

In the UK, Harris, Siegel and Wright (2005) investigated the productivity gains from the perspective of the industrial plant in MBOs's. Their results found that, before the acquisition, the plants of companies that were the subject of an MBO were less productive than similar plants in your industry. However, after the acquisition has been a notable increase in productivity, higher than in other companies in its sector in the short term 70.5% and 90.3% in the long term.

Definitely improves productivity Equity investee companies in the short term and in the long term, both in technology sectors and in traditional sectors.