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Three Decades of Venture Capital Investment Yields 7.6 Million Jobs and $1.3 Trillion in Revenue
Research Finds That $36K of VC Investment Creates a US Job
First Time State-by-State Rankings Available
October 22, 2001—Washington, DC - Final results of an economic impact study released today by the National Venture Capital Association (NVCA) reveals that venture capital invested during the period 1970 - 2000 created 7.6 million U.S. jobs and more than $1.3 trillion in revenue as of the end of 2000. The research, conducted by DRI-WEFA, formerly Wharton Econometrics, and commissioned by the NVCA, shows that $273.3 billion of venture capital created companies that were responsible for 5.9% of the nation's jobs and 13.1% of the U.S. Gross Domestic Product in 2000. Venture investment led to job and revenue creation most frequently in the computer, consumer, and medical health sectors industry sectors followed by the communications, industrial energy, electronics and biotech. The figures released today are substantially higher than preliminary numbers released in May as they include not only independent venture-backed enterprises but also those venture-backed companies that have been acquired.
"Venture capital creates jobs and is vital to the growth of our nation's economy as evidenced by what it created from 1970 to 2000. This research shows that one American job existed in 2000 for every $36,000 dollars of venture capital invested over the last three decades. As we look forward to the next thirty years, we expect venture capital to play a critical role in nourishing entrepreneurial companies and sparking innovation," commented Mark G. Heesen, President of the National Venture Capital Association. "Venture capital plays an increasingly vital role during difficult economic times such as these, as it is one of the few sources of risk capital available to innovative businesses. Some of today's most successful companies were founded in difficult economic environments."
"Our analysis demonstrates the tremendous impact venture capital has had on job and revenue creation in the United States during the past thirty years. Given that venture capital was less than one percent of U.S. investment activity during most of the period studied, its impact is remarkable," remarked Joseph Kasputys, Chairman of Global Insight, which is the parent company of DRI-WEFA.
Key States Lead the Country in Venture Capital Investment and Impact
The NVCA also released today data that details venture-backed job and revenue creation by state. Topping both lists are California, Texas, Pennsylvania, Massachusetts, New York, and Washington.
YEAR 2000 JOBS
REPRESENTED BY VENTURE-BACKED US COMPANIES
By State*
|
Rank
|
State
|
Jobs
|
|
Rank
|
State
|
Jobs
|
1
|
California
|
1,415,748
|
|
26
|
Kansas
|
58,004 |
2
|
Texas
|
676,158
|
|
27
|
Idaho
|
48,822
|
3
|
Pennsylvania
|
424,652
|
|
28
|
Louisiana
|
46,009
|
4
|
Tennessee
|
382,049
|
|
29
|
Iowa
|
39,066
|
5
|
Massachusetts
|
381,433
|
|
30
|
Arizona
|
38,575
|
6
|
New York
|
369,314
|
|
31
|
Kentucky
|
32,092
|
7
|
Georgia
|
338,188
|
|
32
|
Utah
|
26,593
|
8
|
Washington
|
263,585
|
|
33
|
Oregon
|
23,227
|
9
|
New Jersey
|
260,114
|
|
34
|
Rhode Island
|
19,174
|
10
|
Florida
|
243,578
|
|
35
|
South Carolina
|
16,951
|
11
|
Virginia
|
207,777
|
|
36
|
Nebraska
|
15,171
|
12
|
Illinois
|
180,837
|
|
37
|
Maine
|
10,191
|
13
|
Ohio
|
178,838
|
|
38
|
Delaware
|
9,038
|
14
|
Minnesota
|
165,707
|
|
39
|
Arkansas
|
8,894
|
15
|
North Carolina
|
122,577
|
|
40
|
Oklahoma
|
8,690
|
16
|
Connecticut
|
115,026
|
|
41
|
New Mexico
|
5,536
|
17
|
New Hampshire
|
114,393
|
|
42
|
Alaska
|
5,398
|
18
|
Michigan
|
103,578
|
|
43
|
Nevada
|
3,739
|
19
|
Mississippi
|
81,090
|
|
44
|
North Dakota
|
2,945
|
20
|
Wisconsin
|
81,002
|
|
45
|
Hawaii
|
2,337
|
21
|
Missouri
|
75,390
|
|
46
|
Vermont
|
1,748
|
22
|
Alabama
|
71,669
|
|
47
|
Montana
|
1,525
|
23
|
Maryland
|
63,482
|
|
48
|
Washington DC
|
955
|
24
|
Colorado
|
62,971
|
|
49
|
West Virginia
|
252
|
25
|
Indiana
|
61,765
|
|
50
|
South Dakota
|
236
|
|
Source: DRI-WEFA & National Venture Capital Association
|
YEAR 2000 REVENUES FROM VENTURE BACKED US COMPANIES
By State**
|
Rank
|
State
|
Revenues
|
|
Rank
|
State
|
Revenues
|
1
|
California
|
270,615,616,030
|
|
26
|
Kentucky
|
11,594,169,444
|
2
|
Texas
|
158,182,683,770
|
|
27
|
Michigan
|
10,785,665,480
|
3
|
Washington
|
75,392,483,788
|
|
28
|
Kansas
|
7,332,574,615
|
4
|
New York
|
65,847,643,419
|
|
29
|
Arizona
|
6,121,028,749
|
5
|
Georgia
|
62,797,329,123
|
|
30
|
Iowa
|
5,464,597,383
|
6
|
Pennsylvania
|
58,037,077,758
|
|
31
|
Utah
|
4,813,825,717
|
7
|
Massachusetts
|
48,848,353,174
|
|
32
|
Louisiana
|
4,770,270,407
|
8
|
Illinois
|
41,294,755,150
|
|
33
|
Oregon
|
3,368,712,540
|
9
|
Mississippi
|
39,362,280,000
|
|
34
|
South Carolina
|
2,503,679,883
|
10
|
New Jersey
|
38,151,135,954
|
|
35
|
Oklahoma
|
1,721,211,154
|
11
|
Florida
|
36,446,672,197
|
|
36
|
Nebraska
|
1,417,103,902
|
12
|
Virginia
|
35,689,133,157
|
|
37
|
Arkansas
|
1,345,637,794
|
13
|
Tennessee
|
33,397,219,240
|
|
38
|
Alaska
|
1,208,217,000
|
14
|
Minnesota
|
27,031,944,328
|
|
39
|
Maine
|
1,184,955,819
|
15
|
Connecticut
|
22,927,139,421
|
|
40
|
Rhode Island
|
1,095,502,980
|
16
|
Wisconsin
|
18,401,589,243
|
|
41
|
Delaware
|
804,448,857
|
17
|
North Carolina
|
18,146,256,986
|
|
42
|
Hawaii
|
623,003,264
|
18
|
Ohio
|
18,087,699,760
|
|
43
|
New Mexico
|
595,775,648
|
19
|
Missouri
|
17,491,532,002
|
|
44
|
Nevada
|
571,950,139
|
20
|
Idaho
|
16,867,055,200
|
|
45
|
Vermont
|
237,300,000
|
21
|
New Hampshire
|
14,678,537,740
|
|
46
|
Montana
|
180,903,173
|
22
|
Colorado
|
14,564,791,625
|
|
47
|
South Dakota
|
35,198,370
|
23
|
Indiana
|
13,274,383,722
|
|
48
|
Washington, DC
|
33,183,000
|
24
|
Alabama
|
12,379,345,587
|
|
49
|
West Virginia
|
26,700,000
|
25
|
Maryland
|
12,172,860,978
|
|
50
|
North Dakota
|
8,294,255
|
|
Source: DRI-WEFA & National Venture Capital Association
|
"Venture capital investment is a national phenomenon that helps set the US economy apart from others in the world," said Thomas McConnell of New Enterprise Associates and Chairman of the National Venture Capital Association. "The DRI-WEFA/NVCA study clearly demonstrates that innovation is being cultivated in every region of the United States. As long as there are strong research institutions, an entrepreneurial-friendly legislative and regulatory environment, and a technologically savvy workforce, entrepreneurship and economic growth will prevail in this country."
TOP TEN STATES FOR TOTAL VENTURE DOLLARS INVESTED
1970 - 2000
|
Rank
|
State
|
VC Invested ($mil)
|
|
Rank
|
State
|
VC Invested ($mil)
|
1
|
California
|
$108,809.90
|
|
6
|
New Jersey
|
$9,137.84
|
2
|
Massachusetts
|
$25,986.00
|
|
7
|
Washington
|
$7,383.45
|
3
|
Texas
|
$17,189.20
|
|
8
|
Virginia
|
$7,215.19
|
4
|
New York
|
$16,070.02
|
|
9
|
Pennsylvania
|
$7,186.96
|
5
|
Colorado
|
$9,881.09
|
|
10
|
Georgia
|
$6,435.34
|
| Source: Venture Economics/National Venture Capital Association |
There was an unprecedented geographical diversification of venture capital during the past five years. While states such as California, Massachusetts and New York have consistently been national hotbeds for venture investing, other states showed considerable growth and promise including Maryland, Minnesota, Georgia, Oregon and Colorado.
TOP 15 FASTEST GROWING STATES FOR VC INVESTMENT
1996 - 2001 (5 Year Annual Compound Growth Rate)
|
Rank
|
State
|
VC Invested 1996
|
VC Invested 2001 (Est)
|
5 Year CAGRiii
|
1
|
Maryland
|
99.73
|
1,011.50
|
58.94%
|
2
|
Minnesota
|
114.28
|
526.33
|
35.72%
|
3
|
Massachusetts
|
984.07
|
4,455.93
|
35.26%
|
4
|
Georgia
|
226.75
|
996.39
|
34.45%
|
5
|
Oregon
|
71.60
|
312.91
|
34.31%
|
6
|
New York
|
498.97
|
2,080.27
|
33.05%
|
| 7 |
Colorado
|
305.44
|
1,226.83
|
32.06%
|
8
|
Texas
|
726.74
|
2,678.78
|
29.81%
|
9
|
Connecticut
|
173.07
|
564.71
|
26.68%
|
10
|
California
|
4,858.03
|
14,431.29
|
24.33%
|
11
|
New Jersey
|
423.04
|
1,206.77
|
23.32%
|
12
|
Washington
|
351.94
|
907.76
|
20.86%
|
13
|
Florida
|
332.74
|
844.03
|
20.46%
|
14
|
Virginia
|
493.27
|
971.05
|
14.51%
|
15
|
Illinois
|
298.29
|
573.49
|
13.97%
|
| Source: Venture Economics/National Venture Capital Association |
In addition to the jobs and revenue created by venture capitalists, intellectual capital and innovation also are borne of this type of investment. The NVCA and DRI-WEFA will be looking at such measures in the weeks to come as part of their larger joint project to quantify the economic impact of venture capital on the U.S. and global economies.
The DRI-WEFA study on the Economic Impact of Venture Capital was commissioned by the NVCA and was conducted in the first half of 2001. A database of originally ventured companies in the United States going back to 1970 was mapped to the current companies in the Dun and Bradstreet Database to determine jobs and revenues represented in 2000. The data was then cut by geography and industry. Additional phases of research, which will measure venture capital contribution to technological progress and quality of life, will be conducted later this year. These economic figures were revised upward significantly from the first phase of research as the numbers now take into account originally venture-backed companies that were acquired by larger, publicly traded organizations.
The National Venture Capital Association (NVCA) represents more than 430 venture capital and private equity firms. NVCA's mission is to foster the understanding of the importance of venture capital to the vitality of the U.S. and global economies, to stimulate the flow of equity capital to emerging growth companies by representing the public policy interests of the venture capital and private equity communities at all levels of government, to maintain high professional standards, facilitate networking opportunities and to provide research data and professional development for its members. For more information about NVCA, please visit www.nvca.org.
DRI-WEFA is one of the world's leading economic information and consulting firms. Staffed with more than 200 economists, DRI-WEFA collects and analyzes data from around the globe, monitors developments in over 152 countries, provides objective, highly regarded, detailed analyses of economic, financial and industry activity and provides clients with custom solutions for their information needs. Founded as Wharton Econometric Forecasting Associates in 1963 by Lawrence R. Klein, the 1980 Nobel Laureate, DRI-WEFA merged with Chase Econometrics in 1987. Among their more than 3000 clients DRI-WEFA enjoys a worldwide reputation for the highest standards, analytical power and industry insights.
Venture Economics, a Thomson Financial company, is the foremost information provider for private equity professionals worldwide. Venture Economics offers an unparalleled range of products from directories to conferences, journals, newsletters, research reports, and the VentureXpert (tm) database. For over 35 years, Venture Economics has been tracking the venture capital and buyouts industry. Since 1961, it has been a recognized source for comprehensive analysis of investment activity and performance of the private equity industry. Venture Economics maintains long-standing relationships within the private equity investment community, in-depth industry knowledge and proprietary research techniques. Private equity managers and institutional investors alike consider Venture Economics information to be the industry standard.
*Shown in Chart are venture-backed jobs that were attributed to specific states. The study also found 733,912 jobs that were not able to be identified with a specific state due to acquisitions. This number is reflected in the 7.6 million job total.
** Shown in Chart are venture-backed revenues that were attributed to specific states. The study also found $62.1 billion in revenues that were not able to be identified with a specific state due to acquisitions. This number is reflected in the $1.3 trillion revenue total.
iii Methodology compared the 1996 venture investment with estimated 2001 totals which were based on first half results multiplied by a factor of 1.55. Only those states which had projected venture capital investment greater than $300M in 2001 were considered.
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