Innovative entrepreneurship is a key lever for the economic growth of nations, venture capital has often played a decisive role in cases of success. Even in the Italian context, the venture capital system is one of the main drivers for the generation of wealth and employment.
The first draft of the paper on the prospects of venture capital and innovative entrepreneurship is available on-line. It is a “beta version” open to contributions and improvements, prepared in view of the “veDrò: Italy of the future” event and linked to the discussions developed during the initiative.
Here is an excerpt of the text:
The objective of this work is to stimulate the debate on the strategic role of risk capital for the long term competitiveness of the Italian economy. It is well known that venture capital is financing of newly established companies operating in high growth sectors. This is a form of investment that has a long-term view, which is not very liquid and with a significant level of risk, which aims to achieve comparatively higher returns than other forms of funding.
In the report “The Global Venture Capital and Private Equity Attractiveness Index 2009-10”, written by the IESE Business School in collaboration with Ernst Young, Italy is placed in the twenty-ninth place in the world rankings – due to the attractiveness of its economic system towards these forms investment. According to this study the main threat to the venture capital market in the coming years is the limited VC role in supporting R&D activity and early stage financing in innovative ventures. This factor is linked to the traditional weaknesses of the Italian market context: excessive taxation, significant weight of the mature sectors exposed to international competition, inefficient structure of the labor market, low levels of investment and low penetration of the Internet. These are elements that have an impact on those involved directly and beyond the specialized operators: the link between venture capital and positive economic development is very clear and has been identified by various sources.
A higher incidence of investment in innovative companies in their early stages of activity is related to an increase in economic growth, employment and the main indicators of innovation. For example, venture backed companies in the United States produce 21% of GDP and employ 11% of those employed in the private sector. In addition, companies backed by venture capital are higher performing and achieve better results than other companies, both in terms of product income and in terms of new jobs generated. This is especially true for funds that operate in the first quartile, which act with a “hands on” approach, supporting entrepreneurs in business development and in commercial and financial networking. According to a recent study of average high-growth companies by the Ewing Marion Kauffman Foundation, the top 1% of the US champion, created 40% of new jobs. It is this type of conclusion that highlights the importance of innovative entrepreneurship and the creation of new companies in high growth sectors.