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The Venture Capital and Private Equity Country Attractiveness Index 2013

Annually, IESE Business School at University of Navarra publishes its report “The Venture Capital and Private Equity Country Attractiveness Index”. The goal of the report is to guide “institutional investors to solve the problem of where to allocate their capital.”

In its latest 2013 version, the report offers a thorough study in VC and PE Assets, and its “major shift of focus from ‘traditional’ and mature VC and PE markets towards emerging regions.” According to “The Venture Capital and Private Equity Country Attractiveness Index 2013” report, the determinants of vibrant VC and PE markets have been extensively studied in academic literature. Therefore, considering all the factors that affect institutional investors’ decision  making, there are six “key drivers” of the country attractiveness for investors in VC and PE assets:

1. Economic Activity

1. Economic Activity

According to the “Country Attractiveness Index, “An economy’s size and employment levels are proxies for prosperity, the number and diversity of corporations and general entrepreneurial activity, and therefore also for expected VC and PE deal flow. Economic growth expectations require investments and provide the rationale to enter many emerging countries.”

2. Depth of Capital Market

2. Depth of Capital Market

“There is a direct link between the quoted capital market, banking activity and the unquoted segment. Banks are required for transaction financing and credit facilities. The size of the IPO market indicates the potential for the preferred exit channel and IPOs likewise spur entrepreneurial spirit because they reward entrepreneurs.”

3. Taxation

3. Taxation

This key driver is considered a relatively low weight one, according to the Reprot, because “tax aspects are more important for start-up activity.”

4. Investor Protection & Corporate Governance

4. Investor Protection & Corporate Governance

“Legal structures and the protection of property rights strongly influence the attractiveness of VC and PE markets. La Porta et al. (1997 and 1998) confirm that the legal environment determines the size and extent of a country’s capital market and local companies’ ability to receive outside financing.”

5. Human & Social Environment

5. Human & Social Environment

“Black and Gilson (1998), Lee and Peterson (2000), and Baughn and Neupert (2003) argue that cultures shape both individual orientation and environmental conditions, which may lead to different levels of entrepreneurial activity.” Therefore, this key driver has a “particular importance in some emerging countries with high perceived levels of corruption.”

6. Entrepreneurial Culture & Deal Opportunities

6. Entrepreneurial Culture & Deal Opportunities

“The expectation regarding access to viable investments is probably the most important factor for international risk capital allocation decisions. Particularly for the early stage segment, we expect the number and volume of investments to be related to the innovation capacity and research output in an economy.”

To read the full 2013 report, please click here, to visit the website for a more dynamic look, please visit here.

Attractivenss
Country Attractiveness

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