ONLINE CHAPTERS
Venture capital fund raising and investment in Asia grew significantly between 1995 and 2000,
though much less rapidly than in Europe or the United States. Japan has a financial specialty referred to
as ‘venture capital’, but most of the companies involved are commercial or investment bank subsidiaries
that make few truly entrepreneurial investments. Although China is the fastest-growing major economy
in the world, venture capital and private equity have traditionally played a small role in its development,
mainly because the country lacks the basic legal infrastructure needed to support a vibrant VC market,
and because access to a listing on a Chinese share market is severely restricted. Nonetheless, many VC-
backed US manufacturing ventures have a Chinese sourcing and production component. In addition,
China has started to attract more PE funding; according to Bain and Company,^11 the PE market in
China attracted US$43 billion in funding over the five-year period to the third quarter of 2011. In
addition, over recent years, many Chinese VC investors have started to look at other markets, such as the
Australian share market, as a means of exiting their investments via IPOs. India is another interesting
and promising private equity market in the world today. India’s history as a former British colony gave it a
legal system similar to US multiple stock exchanges, as well as a heritage of using English as the official
business language. India’s rapid economic development since 1991 has been propelled both by the
macroeconomic and market-opening reforms adopted that year and by relatively large inflows of foreign
investment, which were attracted by India’s vast potential and by the quality of the graduates of its> >
Venture capital and private equity
investment
Country $US billion % of GDP R&D spending as a % of GDP
Australia 2.32 0.31 1.57
Korea 2.10 0.27 4.08
India 1.94 0.24 0.74
Denmark 1.24 0.48 1.76
Canada 1.24 0.11 2.01
Israel 1.08 0.88 5.15
South Africa 0.89 0.37 2.00
New Zealand 0.75 0.68 0.99
Indonesia 0.56 0.19 –The above table details how a country’s venture
capital and private equity investment and R&D
spending related to its GDP in 2005. A review of
the table shows that, whereas Singapore had the
highest level of venture capital and private equity
investment as a per cent of its GDP (3.77%), Israel
had the highest levels of R&D spending as a per
cent of GDP (5.15%). Other countries with high
levels of VC and private equity investment relative
to GDP include the United Kingdom, Sweden, Israeland New Zealand. Countries exhibiting high levels
of R&D spending relative to GDP include Korea,
Sweden, Singapore, Japan and the United States.
Comparing each country’s VC and private equity
investment as a per cent of GDP to its R&D spending
as a per cent of GDP, it is clear that most countries
finance well below half of their R&D expenditures
with venture capital and private equity. Clearly, much
of the R&D financing must come from company and
government sources.Sources: Venture capital and private equity investment data, PricewaterhouseCoopers, Global Private Equity Report 2006
(http://www.pwcmoneytree.com), gross domestic product data for OECD countries from organization for economic co-operation and development
(www.oecd.org); other nations’ data from world bank (http://www.worldbank.Org), R&D spending data, OECD statistics (http://www.oecd.org),
except India, whose research spending value is from a report by a national science administrator11 Bain and Company, Global Private Equity Report 2012.