Kryvda Iryna

Student

National Technical University of Ukraine Kiev Polytechnic Institute, NTUU KPI

Kyiv, Ukraine

Voitko Sergiy

Professor, Ph.D. in Economics, Head of the Department of International Economics

National Technical University of Ukraine Kiev Polytechnic Institute, NTUU KPI

Kyiv, Ukraine

DEVELOPMENT OF VENTURE FUNDS IN DIFFERENT COUNTRIES

Despite the economic downturn in many countries, the market of venture capital experiences substantial growth. In 2015 venture capitalists invested more than $128 billion worldwide that represents a 44 percent annual growth in comparison to 2014 [1, p.2]. As was mentioned on the World Economic Forum 2016 we live in the age of disruptive technological changes which can result in a Fourth Industrial Revolution [2]. It’s an age when the new technologies such as drive-less cars, artificial intelligence and virtual reality tools change the way we do our everyday tasks and transform different industries. Venture capital funds support start-up companies and help them to develop a viable product in such way supporting new technological advances. This work is aimed to analyze the main trends of venture capital industry in different regions of the world.

The main three markets for venture funding are the US, China and Europe. In all these regions the amount of money invested to VC-backed companies increased over the last three years and demonstrated an activity unseen since the period of dot-com boom [picture 2]. The amount of investments made in 2015 exceeds 2014 by 44 percent ($128.5 and $89.4 billion respectively).

One of the most dynamic start-up hubs in the world is Israel. This country is often described as a start-up nation referring to the amount of technological companies and investments in start-ups. Israel has a leading position in the world considering the investment dollars per capita (picture 1, 4). Tel-Aviv is often compared with Silicon Valley in the USA because it attracts outstanding amount of investors. This country demonstrates the rapid growth of venture capital industry. According to Bloomberg innovative index 2015 Israel is on the fifth position in the overall ranking. It considers the six equally-weighted criterions such as research and development expenditure, manufacturing, high-tech companies, postsecondary education, research personnel and patents [3]. The distinctive feature of Israeli tech-firms is that they are aimed to target not only local market which is too small but to function globally [5].

The country that attracts the biggest amount of overall investments in total is America. Despite the general growth in 2015 the number of deals decreased in comparison to 2014 (4890 and 5460 respectively) [1, p.40]. The proportion of capital invested on different rounds also changed. Many venture capital firms shifted from the early-stage investments (seed round) to mid- and later-stage rounds [1, 43].

Chinese market of venture capital attracted the record-setting amount of investments due to the government support. In 2015 Chinese government created a $6.5 billion fund to invest money in start-ups in the seed round [6]. The amount of incubators and high-tech parks increases dramatically as they enjoy tax benefits. In comparison to the other regions in China state support have a greater impact on the venture capital market and IT industry.

In 2015 the amount of venture capital investments in Europe reached all-time high of $13.4 billion. In contrary to the US and Asia the number of seed-stage deals increased in the VC market. The countries that have the biggest potential for growth and occupy the leading position on European VC market are Germany and the UK with $1.3 and $0.43 billion of investment respectively.

The data on venture capital investments in different countries and regions gives evidence that 2015 was a year of steady growth with a record-setting amount of investment. Despite the economic downturn in many countries the investment activity in tech sector increases every year and have a potential for further growth.

Literature

1. Dennis Fortnum. Venture Pulse Q4 2015 / // KPMG, CBInsights.
2. Recap of Davos 2016, http://www.weforum.org/agenda/2016/01/a-recap-of-davos-2016.
3. The Bloomberg Innovation Index, http://www.bloomberg.com/graphics/2015-innovative-countries/
4. Annual Report 2015: Startups and Venture Capital in Israel, http://www.geektime.com/2016/01/11/annual-report-2015-startups-and-venture-capital-in-israel/
5. Israel Unpacked: The Next Move For Start-up Nation, http://www.forbes.com/sites/giovannirodriguez/2015/03/23/israel-unpacked-the-next-move-for-start-up-nation/#3c0790367355
6. How China Boosts Its Tech Startups, http://www.wsj.com/articles/how-china-boosts-its-tech-startups-1442443212

Picture 1                                                       Picture 2