Eustat

Methodological note. IUS: Venture capital as % of GDP

The amount of venture capital is a proxy for the relative dynamism of new business creation. In particular for enterprises using or developing new (risky) technologies venture capital is often the only available means of financing their (expanding) business. By inclusing early-stage, expansion and replacement VC the indicator will provide a better picture on the availability of a domestic VC industry and will help to decrease year-to-year volatility of this indicator.

Venture capital is a highly volatile indicator. Therefore two-year averages will be used to reduce volatility rates.

This is, in addition, a highly skewed indicator and a square root transformation has been used when using it for the composite indicator to reduce the volatility and skewed distribution of this indicator.

The indicator is obtained as a quotient.

Numerator:

Venture capital investment is defined as private equity being raised for investment in companies. Management buyouts, management buyins, and venture purchase of quoted share are excluded. Data are broken down into two investment stages: Early stage (seed + start-up) and Expansion and replacement (expansion and replacement capital). Seed is defined as financing provided to research, assess and develop an initial concept before a business has reached the start-up phase. Start-up is defined as financing provided for product development and initial marketing, manufacturing, and sales. Companies may be in the process of being set up or may have been in business for a short period of time, but have not sold their product commercially. Expansion is defined as financing provided for the growth and expansion of a company which is breaking even or trading profitably. Capital may be used to finance increased production capacity, market or product development, and/or provide additional working capital. It includes bridge financing for the transition from private to public quoted company, and rescue/turnaround financing. Replacement capital is defined as purchase of existing shares in a company from another private equity investment organisation or from another shareholder(s). It includes refinancing of bank debt.

Denominator:

Gross domestic product as defined in the European System of Accounts (ESA 1995), in national currency and current prices.

Venture capital is a highly volatile indicator. Therefore two-year averages will be used to reduce volatility rates.

This is, in addition, a highly skewed indicator and a square root transformation has been used when using it for the composite indicator to reduce the volatility and skewed distribution of this indicator.

Source: ASCRI, Eustat