The Global Venture Capital and Private Equity Country Attractiveness Index, which covers 66 countries, has been created in collaboration with Ernst & Young. This new index highlights two aspects: the contrast of opportunities and the diversity of challenges faced by international venture capital. The project is led by professors Heinrich Liechtenstein and Alexander Groh. The aim of the project is to advise investors about the challenge of deciding where to allocate venture capital. It is also aimed at helping politicians in their efforts to influence economic conditions and boost the vitality of their regions. “This is the first time that VC/PE country attractiveness has been assessed to such an extent,” says Groh.
 
The 10 countries topping the list are: United States, Canada, United Kingdom, Australia, Hong Kong, Singapore, Japan, Switzerland, Netherlands and Germany. These countries are recognized for having improved their “competitiveness, openness and professionalism” within their borders, explains Prof. Liechtenstein.

The fact that the United States remains the main magnet for venture capital investments is partly due to it having a legal system that fosters flexibility and protection in venture capital transactions. According to Prof. Liechtenstein, “the culture and entrepreneurial spirit of the US society is also a key factor. That mentality translates into greater innovation, employment and, ultimately, in greater prosperity.”

The index findings reveal a common pattern: the countries that scored highest in investor protection and corporate governance held the top positions, given that these criteria are key to achieving more liquid and efficient capital markets. At the same time, these markets promote a dynamic environment that facilitates the flow of transactions and opportunities for getting out.

To reach these conclusions, the study was based on the six key criteria for investors: economic activity; depth of the capital markets; taxation; investor protection and corporate governance; the human and social environment; and entrepreneurial culture and opportunities.

“The outlook for investors will continue to evolve as the limited liability companies themselves decide where to allocate their capital and venture capital funds also try to make the wisest investments. Obviously, there will be winners and losers and thus the Global Venture Capital and Private Equity Country Attractiveness Index constitutes a valuable tool and compass to guide those funds in these times of uncertainty,” says John Harley, leader of Global Private Equity at Ernst & Young.

Significant Improvement of Emerging Markets


The study—based on data going back to the year 2000—shows that China, Poland and India have made great strides over the past five years, improving their attractiveness for venture capital investors. Among the countries that in the last years have seen a relative decline in their investment attractiveness, compared to other countries, are: Kuwait, Latvia and Oman.

According to Groh, the reasons for success varied among the different countries included in the ranking. The solid position in the ranking achieved by China is largely due to the economic decisions made by politicians, whereas the increased attractiveness of Poland may be due to its entry into the EU and to the expansion of capital markets through the creation and development of the Warsaw Stock Exchange.