These facts about private equity and venture capital come from trusted academic research. They show how private equity investment contributes to Europe’s economy and society
Backing Europe: Private equity and venture capital funds have invested € 271 billion in Europe since 2007 Source: EVCA/PEREP_Analytics (2012)
Venture capital: “Venture capital” is financial capital aimed at investing in start-up companies who have high potential but also some degree of risk, such as a new IT firm. It is a type of private equity.
Private equity: Private equity represents investment in companies that are not publicly listed and traded on a stock exchange (hence “private”). This investment can be made by private equity firms, venture capital firms or business angels (informal investors).
Innovation: Private equity investments stimulate innovation and in particular cause a significant increase in patent filings Sources: Popov and Roosenboom, ECB Working Paper (2009)
Patent filings: When a company creates an invention, it often requests an exclusive right of use for a limited time through a patent filing. This allows the company to recover research and development costs through a temporary monopoly. Patent filings are common in innovative sectors.
Private equity: Private equity represents investment in companies that are not publicly listed and traded on a stock exchange (hence “private”). This investment can be made by private equity firms, venture capital firms or business angels (informal investors).
Start-ups: The availability of venture capital has a significant positive effect on the likely emergence of new entrepreneurial projects with high growth and high innovation potential Source: VICO Project (2011)
Start-ups: Start-ups are new companies searching for a sustainable business model, often working in innovative and rapidly-changing fields. Examples of start-ups that have matured include Google, Spotify and Skype.
Venture capital: “Venture capital” is financial capital aimed at investing in start-up companies who have high potential but also some degree of risk, such as a new IT firm. It is a type of private equity.
SMEs: European private equity firms provide financing to about 5,000 companies per year, of which 83% are Small and Medium-sized Enterprises Source: EVCA/PEREP_Analytics (2012)
SMEs: Small and medium-sized enterprises (SMEs) are relatively small companies, generally with less than 250 employees, although definitions vary. In the European Union they are estimated to provide two-thirds of all jobs and 60% of economic wealth.
Private equity: Private equity represents investment in companies that are not publicly listed and traded on a stock exchange (hence “private”). This investment can be made by private equity firms, venture capital firms or business angels (informal investors).
Growth: Private equity backed companies can be an engine of growth for SMEs. They experience greater growth in sales, assets and employment than those not backed by a private equity fund Source: Boucly et al, Journal of Financial Economics (2011)
Private equity: Private equity represents investment in companies that are not publicly listed and traded on a stock exchange (hence “private”). This investment can be made by private equity firms, venture capital firms or business angels (informal investors).
Private equity: Private equity represents investment in companies that are not publicly listed and traded on a stock exchange (hence “private”). This investment can be made by private equity firms, venture capital firms or business angels (informal investors).
Long-term Outlook: Private equity funds’ investments in European companies are held for about 5 years on average, compared to one year or less for institutional investments in public companies Source: EVCA/PEREP_Analytics (2011) and Strömberg (2009), SSRN Working Paper
Private equity: Private equity represents investment in companies that are not publicly listed and traded on a stock exchange (hence “private”). This investment can be made by private equity firms, venture capital firms or business angels (informal investors).
Access to Finance: Following a private equity majority investment, companies are able to increase their capital expenditure and become more profitable than their competitors Source: Boucly et al, Journal of Financial Economics (2011)
Private equity: Private equity represents investment in companies that are not publicly listed and traded on a stock exchange (hence “private”). This investment can be made by private equity firms, venture capital firms or business angels (informal investors).
Secure: Private equity backed businesses are less likely to default than other companies (3% compared to 6% during 2008-2009 recession in Europe) Source: Thomas (2010), SSRN Working Paper
Private equity: Private equity represents investment in companies that are not publicly listed and traded on a stock exchange (hence “private”). This investment can be made by private equity firms, venture capital firms or business angels (informal investors).
Efficiency: In companies with private equity majority ownership there is evidence of increased operating margins, productivity and capital efficiency Source: Strömberg, SSRN Working Paper (2009)
Operating margin: Operating margin is a measure of a company’s profitability. It is defined as the proportion of total income left after spending on the company’s regular activity (such as salaries, building rents…).
Productivity: Productivity refers to output divided by the number of hours worked. A company with higher productivity is able to produce more with less work.
Capital efficiency: Capital efficiency refers to output divided by investment. A company with higher capital efficiency is able to produce more with less money.
Private equity: Private equity represents investment in companies that are not publicly listed and traded on a stock exchange (hence “private”). This investment can be made by private equity firms, venture capital firms or business angels (informal investors).
Productivity: Private equity investments in large European companies improved their productivity by 7 % per year Source: Ernst and Young, 2012
Productivity: Productivity refers to output divided by the number of hours worked. A company with higher productivity is able to produce more with less work.
Private equity: Private equity represents investment in companies that are not publicly listed and traded on a stock exchange (hence “private”). This investment can be made by private equity firms, venture capital firms or business angels (informal investors).
If you have any questions about the sources of these facts please contact EVCA Head of Research, Cornelius Mueller
cornelius.mueller@evca.eu
