Where risk capital ventures
Venture capital is the main source of funding for new technology-based businesses. It has been on a rising trend in most OECD countries in recent years, with the US market far and away the leading world player, with US$8.7 billion (purchasing power parities) channelled into venture capital in 1997. Most of that goes into investment in the expansion stage, though US venture funding of seed capital is over a third of the total.
The United Kingdom is another important market, with US$1.5 billion, but only a small portion of that is seed capital. The highest in terms of GDP and size is Canada, with US$1.4 billion, followed by the Netherlands; their breakdown in terms of seed and expansion funding is similar to that of the United States. The EU’s total of US$4.4 billion is half that of the United States. Meanwhile, venture capital markets are immature in Japan, where just US$113 million was invested in the same year.The targeting of venture capital by sector is not at all the same from country to country. In 1997, information technology and communications absorbed over half in the United States, while investments in health and biotechnology were also significant. These “new economy” industries did not capture the imagination of European investors quite as much, since IT and communications accounted for only 16% of venture capital spending. The equivalent figure in Japan was just 10%.
©OECD Observer No 219, December 1999