VC investment in U.S. companies key to Global Economy
Anis Uzzaman, 23 (2/2/2023; founder and CEO of Pegasus Tech Ventures, a Silicon Valley-based venture capital firm that offers intellectual and financial capital to emerging technology startups, PhD in Computer Engineering from Tokyo Metropolitan University; “How Startups and Investors Can Thrive in the Current Economic Environment”; Entrepeneur; https://www.entrepreneur.com/starting-a-business/how-startups-and-investors-can-thrive-in-the-current/443254) //LVL
Today's macro-economic environment has changed significantly and we see the signs everywhere. There's an obvious economic slowdown, the stock market has declined, and recent reports of layoffs – especially in the tech sector – point to a looming recession. Despite the negative elements of such an economy, it also presents an opportunity for smart startup founders and savvy investors to thrive.
The impact of venture capital
It may be surprising how much venture capital (VC) investing impacts the global economy. Forbes reports that VC investing used to be very risky; even as it has grown, in the U.S., it accounts for only 0.8% of the gross domestic product, compared to about 5% for the private equity industry. The numbers are even smaller in the United Kingdom and Europe. Despite that, between 1980 and 2020, about 39% of all IPOs were venture-backed; VC-based companies have also been proven to grow more than two times as fast as their non-VC-backed peers over a ten-year horizon.
Data also shows that VC investing drives innovation and employment. Public companies with VC funding account for 44% of U.S. public companies' research and development spending. Over ten years, employment by VC-based startups increased by 475% compared to 230% for the control group.