Venture capital still a big deal for the US economy, study says

September 16, 2009 | Anthony Ha | Comments | |

Venture capital remained crucial to national economic growth over the last two years, according to a new study conducted by IHS Global Insight and commissioned by the National Venture Capital Association.

nvca-report-1I doubt many VentureBeat readers (despite criticism they might have of the venture industry) would argue that venture capital and startups aren’t important to the US economy. Still, the NVCA compiles this data every two years, presumably to remind lawmakers that they should listen to the VC industry, even if it seems to be only a tiny part of the financial sector. (The report’s authors love the metaphor of ripples expanding from a single raindrop hitting the surface of a lake.)

The study says:

  • Venture-backed companies outperformed the overall economy from 2006 to 2008. Jobs at venture-backed companies grew 1.6 percent, compared to 0.2 percent in the entire US private sector. And revenue at those companies grew 5.2 percent, compared to 3.5 percent in the private sector.
  • Venture capital grows industries “from scratch.” For example, the $4.1 billion of venture investments in cleantech in 2008 is helping to turn the technology into a real industry.
  • Venture capital’s impact is spreading across the country through regional venture hubs. Unsurprisingly, California and New York are the states with the most jobs and revenue at venture-backed companies, but they’re followed by Texas (918,451 jobs), Massachusetts (651,239) and Georgia (621,181). Entrepreneurial and venture communities are growing in the Pacific Northwest, the mid-Atlantic, and the Southwest.

nvca-report-2After the report has (hopefully) convinced you of venture capital’s significance, it closes with a list of the NVCA’s legislative concerns: “intellectual property protection, open trade provisions, immigration support for highly-skilled workers and encouragement of capital formation.”

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About the Author, Anthony Ha

Anthony is VentureBeat's assistant editor, as well as its reporter on enterprise technology, cloud computing, and tech policy. Before joining VentureBeat in 2008, Anthony worked at the Hollister Free Lance, where he won awards from the California Newspaper Publishers Association for breaking news coverage and writing. He attended Stanford University and now lives in San Francisco. Reach him at anthony@venturebeat.com. You can also follow Anthony on Twitter.

  • Aakar15
    Even though the industry has been hampered by a weak economy and exit market over the past year, its undeniable that venture capital is essential to the US, not just from an economical viewpoint but in terms of innovation and staying ahead of other counties in technological advancement. Its no surprise that the US leads the world in both venture capital investment and innovation, they go hand in hand. I think we'll see the industry get healthier over the next year... here's my stab at how 2009 will end up: http://bit.ly/3Kri5m
  • eavg
    Those claiming that the venture capital and private equity industry aren't important to the US economy must be lost. Some of the worlds largest companies have been venture backed since day 1. I see it all of the time - VCs and Angels are the catalysts for US growth and competitiveness in the international marketplace.

    www.eavg.com