The Role of Venture Capital for Economic Growth in the Nordic Region (Swedish Private Equity & Venture Capital Association (SVCA))
Summary
- Venture capital (VC) funds invest in only around 0.2% of new U.S. businesses, yet 43% of U.S. public listed companies founded between 1979 and 2013 were VC-backed.p.8
- In the Nordics, VC-backed companies employ around 37,000 people across approximately 1,500 companies.p.10
- VC-backed companies in Sweden, Finland, and Norway generated an annual average turnover growth of 55%, five times higher than small- and midsize cap companies.p.11
- Every vintage of VC investments in the Nordics generates an estimated total societal return of EUR 300 million.p.12
- Nordic pension funds currently hold around 0.1% of their portfolio in VC, and increasing this allocation to 0.5% would boost annual VC fundraising by more than 60%.p.25
- Implementation of the Alternative Investment Fund Managers Directive (AIFMD) was cited by 47% of surveyed Nordic VC funds as a major regulatory challenge.p.31
Key insights
- Early-stage VC is a high-risk asset class where around 2/3 of investments in the US generate a loss, while return multiples above 20x represent only 1.5% of investments.p.6
- High-tech sectors with heavy R&D reliance depend strongly on equity finance, with ICT and Life Science combined receiving 70% of EU VC investments in 2015.p.7
- Nordic VC-backed companies outperform regular small- and midsize cap firms in annual job creation, achieving 12% average employment growth compared to 6%.p.11
- Venture capital investments yield economic spill-overs such that 1 EUR in VC investment produces 3.33 EUR in output growth across OECD countries.p.12
- Nordic VC investment as a share of GDP ranges between 0.02% in Norway and 0.05% in Finland, trailing the US level of 0.36%.p.15
- A survey of Nordic VC funds shows 63% are more optimistic about the future than 12 months prior, driven mainly by high-quality investment opportunities in tech and life science.p.18
- Nordic growth companies face a shortage of scale-up capital because average later-stage investment sizes in the Nordics are EUR 1.1 million compared to EUR 2.4 million among European peers.p.24
- Survey results reveal that 58% of Danish VC funds and 56% of Swedish VC funds consider taxation the top priority for government policy reform.p.29
Topics and entities
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