Transcript Prevalence rate of informal investors, adults 18

Global Entrepreneurship Monitor
Informal Investors:
Silent Heroes of an Entrepreneurial Society
William D. Bygrave
Reykjavik, December 12, 2008
© 2008 Copyright William Bygrave
Global Entrepreneurship Monitor
Contents
1. GEM (Global Entrepreneurship Monitor) Overview
2. Entrepreneurial Activity
3. Informal Investment
4. Venture Capital
5. Recommendations
Global Entrepreneurship Monitor
Global Entrepreneurship Monitor
GEM Founded in 1997
Global Entrepreneurship Monitor
Consortium Initiated in 1999
Canada
UK
France
Finland
Denmark
Germany
Italy
USA
Japan
Israel
Global Entrepreneurship Monitor
First Planning Meeting, Babson, Janaury1999
Global Entrepreneurship Monitor
More than 60 GEM Nations 1999-2008
Global Entrepreneurship Monitor
More than 60 GEM Nations 1999-2008
• Now the largest ongoing study of entrepreneurial
dynamics in the world
• 45 countries participating on GEM in 2008
• More than 95% of Global GDP
• More than 70% of World’s Population
Global Entrepreneurship Monitor
December 2008: Reykjavik University Becomes a GEM Supporting Institution
Global Entrepreneurship Monitor
GEM Program Objectives
• To measure differences in the level of entrepreneurial activity
between countries
• To uncover factors leading to alternative levels of
entrepreneurship
• To suggest policies that may enhance the national level of
entrepreneurial activity
Global Entrepreneurship Monitor
GEM Program Objectives
• To measure differences in the level of entrepreneurial activity
between countries
• To uncover factors leading to alternative levels of
entrepreneurship
• To suggest policies that may enhance the national level of
entrepreneurial activity
• To explain the contribution of entrepreneurship to economic
growth
Model of the entrepreneurial process
PERSONAL
PERSONAL
SOCIOLOGICAL
PERSONAL
ORGANIZATIONAL
Achievement
Locus of Control
Ambiguity Tolerance
Risk Taking
Risk Taking
Job Dissatisfaction
Job Loss
Education
Age
Networks
Teams
Parents
Family
Role Models
Entrepreneur
Leader
Manager
Commitment
Vision
Team
Strategy
Structure
Culture
Personal Values
Education
Experience
INNOVATION
Products
Commitment
TRIGGERING EVENT
IMPLEMENTATION
GROWTH
ENVIRONMENT
ENVIRONMENT
ENVIRONMENT
Opportunities
Role Models
Creativity
Competition
Resources
Incubator
Government policy
Competitors
Customers
Suppliers
Investors
Bankers
Lawyers
Resources
Government policy
Based on Carol Moore's Model
Model of the entrepreneurial process
PERSONAL
PERSONAL
SOCIOLOGICAL
PERSONAL
ORGANIZATIONAL
Achievement
Locus of Control
Ambiguity Tolerance
Risk Taking
Risk Taking
Job Dissatisfaction
Job Loss
Education
Age
Networks
Teams
Parents
Family
Role Models
Entrepreneur
Leader
Manager
Commitment
Vision
Team
Strategy
Structure
Culture
Personal Values
Education
Experience
INNOVATION
Products
Commitment
TRIGGERING EVENT
IMPLEMENTATION
GROWTH
ENVIRONMENT
ENVIRONMENT
ENVIRONMENT
Opportunities
Role Models
Creativity
Competition
Resources
Incubator
Government policy
Competitors
Customers
Suppliers
Investors
Bankers
Lawyers
Resources
Government policy
Based on Carol Moore's Model
Model of the entrepreneurial process
PERSONAL
PERSONAL
SOCIOLOGICAL
PERSONAL
ORGANIZATIONAL
Achievement
Locus of Control
Ambiguity Tolerance
Risk Taking
Risk Taking
Job Dissatisfaction
Job Loss
Education
Age
Networks
Teams
Parents
Family
Role Models
Entrepreneur
Leader
Manager
Commitment
Vision
Team
Strategy
Structure
Culture
Personal Values
Education
Experience
INNOVATION
Products
Commitment
TRIGGERING EVENT
IMPLEMENTATION
GROWTH
ENVIRONMENT
ENVIRONMENT
ENVIRONMENT
Opportunities
Role Models
Creativity
Competition
Resources
Incubator
Government policy
Competitors
Customers
Suppliers
Investors
Bankers
Lawyers
Resources
Government policy
Based on Carol Moore's Model
Model of the entrepreneurial process
PERSONAL
PERSONAL
SOCIOLOGICAL
PERSONAL
ORGANIZATIONAL
Achievement
Locus of Control
Ambiguity Tolerance
Risk Taking
Risk Taking
Job Dissatisfaction
Job Loss
Education
Age
Networks
Teams
Parents
Family
Role Models
Entrepreneur
Leader
Manager
Commitment
Vision
Team
Strategy
Structure
Culture
Personal Values
Education
Experience
INNOVATION
Products
Commitment
TRIGGERING EVENT
IMPLEMENTATION
GROWTH
ENVIRONMENT
ENVIRONMENT
ENVIRONMENT
Opportunities
Role Models
Creativity
Competition
Resources
Incubator
Government policy
Competitors
Customers
Suppliers
Investors
Bankers
Lawyers
Resources
Government policy
Based on Carol Moore's Model
Model of the entrepreneurial process
PERSONAL
PERSONAL
SOCIOLOGICAL
PERSONAL
ORGANIZATIONAL
Achievement
Locus of Control
Ambiguity Tolerance
Risk Taking
Risk Taking
Job Dissatisfaction
Job Loss
Education
Age
Networks
Teams
Parents
Family
Role Models
Entrepreneur
Leader
Manager
Commitment
Vision
Team
Strategy
Structure
Culture
Personal Values
Education
Experience
INNOVATION
Products
Commitment
TRIGGERING EVENT
IMPLEMENTATION
GROWTH
ENVIRONMENT
ENVIRONMENT
ENVIRONMENT
Opportunities
Role Models
Creativity
Competition
Resources
Incubator
Government policy
Competitors
Customers
Suppliers
Investors
Bankers
Lawyers
Resources
Government policy
Based on Carol Moore's Model
Model of the entrepreneurial process
PERSONAL
PERSONAL
SOCIOLOGICAL
PERSONAL
ORGANIZATIONAL
Achievement
Locus of Control
Ambiguity Tolerance
Risk Taking
Risk Taking
Job Dissatisfaction
Job Loss
Education
Age
Networks
Teams
Parents
Family
Role Models
Entrepreneur
Leader
Manager
Commitment
Vision
Team
Strategy
Structure
Culture
Personal Values
Education
Experience
INNOVATION
Products
Commitment
TRIGGERING EVENT
IMPLEMENTATION
GROWTH
ENVIRONMENT
ENVIRONMENT
ENVIRONMENT
Opportunities
Role Models
Creativity
Competition
Resources
Incubator
Government policy
Competitors
Customers
Suppliers
Investors
Bankers
Lawyers
Resources
Government policy
Based on Carol Moore's Model
Global Entrepreneurship Monitor
Entrepreneurship is a complex phenomenon
• Early-Stage Entrepreneurial Activity varies across
countries.
• Rates of Established Business Ownership vary across
countries.
• Entrepreneurial Motivation varies across countries.
• Innovativeness, Competitiveness, and Sectoral
Distributions are important entrepreneurial features.
Global Entrepreneurship Monitor
Data Source
Adult Population Survey (APS)
• 2,000+ individuals
• Surveys April - June
• Processed July – September
• Data harmonized into one data set
• Global report published in January
Global Entrepreneurship Monitor
Categories of Adult Population Survey Questions
• Involvement in starting or owning a business
• Perceptions and skills
• Motives
•
•
Necessity
Opportunity
• Innovativeness
• Internationalization
• Current and expected employment
• Financing
• Discontinuance
Global Entrepreneurship Monitor
Categories of Adult Population Survey Questions
• Involvement in starting or owning a business
• Perceptions and skills
• Motives
•
•
Necessity
Opportunity
• Innovativeness
• Internationalization
• Current and expected employment
• Financing
• Discontinuance
Global Entrepreneurship Monitor
Entrepreneurial Activity
Early-stage Entrepreneurial Activity (TEA)
Potential
entrepreneur:
knowledge and
skills
Conception
Nascent
entrepreneur
involved in
trying to start a
business
Gestation
Owner-manager
of a new
business
(up to 3.5 years
old)
Birth
Baby Business
Owner-manager
of an established
business (more
than 3.5 years
old)
Established Business
Percentage of adult population between 18-64 years
0%
Austria
Puerto Rico
Belgium
France
Sweden
Japan
Slovenia
Italy
Netherlands
Denmark
Israel
UK
Greece
Switzerland
Norway
Finland
Spain
Ireland
UAE
Portugal
US
Hong Kong
Iceland
Russia
Romania
Latvia
Turkey
Hungary
Croatia
India
Serbia
Kazakhstan
China
Thailand
Uruguay
Brazil
Chile
Argentina
Domin. Rep
Venezuela
Colombia
Peru
Global Entrepreneurship Monitor
Entrepreneurial Activity: Early-Stage (2007)
30%
25%
20%
15%
10%
5%
Europe & Asia
High Income Countries
Latin America &
Caribbean
Middle & Low Income Countries
Percentage of adult population between 18-64 years
0%
Austria
Puerto Rico
Belgium
France
Sweden
Japan
Slovenia
Italy
Netherlands
Denmark
Israel
UK
Greece
Switzerland
Norway
Finland
Spain
Ireland
UAE
Portugal
US
Hong Kong
Iceland
Russia
Romania
Latvia
Turkey
Hungary
Croatia
India
Serbia
Kazakhstan
China
Thailand
Uruguay
Brazil
Chile
Argentina
Domin. Rep
Venezuela
Colombia
Peru
Global Entrepreneurship Monitor
Entrepreneurial Activity: Early-Stage (2007)
30%
25%
20%
15%
10%
5%
Europe & Asia
High Income Countries
Latin America &
Caribbean
Middle & Low Income Countries
Percentage of adult population between 18-64 years
0%
Austria
Puerto Rico
Belgium
France
Sweden
Japan
Slovenia
Italy
Netherlands
Denmark
Israel
UK
Greece
Switzerland
Norway
Finland
Spain
Ireland
UAE
Portugal
US
Hong Kong
Iceland
Russia
Romania
Latvia
Turkey
Hungary
Croatia
India
Serbia
Kazakhstan
China
Thailand
Uruguay
Brazil
Chile
Argentina
Domin. Rep
Venezuela
Colombia
Peru
Global Entrepreneurship Monitor
Entrepreneurial Activity: Early-Stage (2007)
30%
25%
20%
15%
10%
5%
Europe & Asia
High Income Countries
Latin America &
Caribbean
Middle & Low Income Countries
H ig h In c o m e C o u n trie s
E a s te rn
L a tin
E u ro p e &
Am e ric a &
C e n tra l
C a rib b e a n
C h in a
S . A fric a
In d ia
A rg e n tin a
B ra z il
M e x ic o
J a m a ic a
R u s s ia
P o la n d
C ro a tia
H u n g a ry
US
N . Z e a la n d
Ic e la n d
Canada
A u s tra lia
S in g a p o re
Is ra e l
Ire la n d
UK
S w itz e rla n d
G e rm a n y
N o rw a y
D e n m a rk
N e th e rla n d s
S lo v e n ia
Sw eden
Ita ly
F in la n d
F ra n c e
S p a in
B e lg iu m
Japan
G re e c e
Global Entrepreneurship Monitor
Entrepreneurial Activity: High-Growth Expectation
2 .0 %
1 .5 %
1 .0 %
0 .5 %
0 .0 %
O th e r
M id d le & L o w In c o m e C o u n trie s
H ig h In c o m e C o u n trie s
E a s te rn
L a tin
E u ro p e &
Am e ric a &
C e n tra l
C a rib b e a n
C h in a
S . A fric a
In d ia
A rg e n tin a
B ra z il
M e x ic o
J a m a ic a
R u s s ia
P o la n d
C ro a tia
H u n g a ry
US
N . Z e a la n d
Ic e la n d
Canada
A u s tra lia
S in g a p o re
Is ra e l
Ire la n d
UK
S w itz e rla n d
G e rm a n y
N o rw a y
D e n m a rk
N e th e rla n d s
S lo v e n ia
Sw eden
Ita ly
F in la n d
F ra n c e
S p a in
B e lg iu m
Japan
G re e c e
Global Entrepreneurship Monitor
Entrepreneurial Activity: High-Growth Expectation
2 .0 %
1 .5 %
1 .0 %
0 .5 %
0 .0 %
O th e r
M id d le & L o w In c o m e C o u n trie s
H ig h In c o m e C o u n trie s
E a s te rn
L a tin
E u ro p e &
Am e ric a &
C e n tra l
C a rib b e a n
C h in a
S . A fric a
In d ia
A rg e n tin a
B ra z il
M e x ic o
J a m a ic a
R u s s ia
P o la n d
C ro a tia
H u n g a ry
US
N . Z e a la n d
Ic e la n d
Canada
A u s tra lia
S in g a p o re
Is ra e l
Ire la n d
UK
S w itz e rla n d
G e rm a n y
N o rw a y
D e n m a rk
N e th e rla n d s
S lo v e n ia
Sw eden
Ita ly
F in la n d
F ra n c e
S p a in
B e lg iu m
Japan
G re e c e
Global Entrepreneurship Monitor
Entrepreneurial Activity: High-Growth Expectation
2 .0 %
1 .5 %
1 .0 %
0 .5 %
0 .0 %
O th e r
M id d le & L o w In c o m e C o u n trie s
Global Entrepreneurship Monitor
Sources of startup financing
• Entrepreneurs themselves
• Informal investors
• Venture capitalists
Global Entrepreneurship Monitor
G E M M od el for In form al In v estm en t
E n tr ep ren e u ria l F ram ew ork
C on d ition s
•F in anc ia l
•G o vernm ent Polic ie s
•G o vernm ent Pro gram s
•E ducation & T rain ing
•R & D T ransfer
•C om m ercia l, L ega l Infra structu re
•Interna l M arket O pen ness
•A cce ss to P hysica l Infrastructure
•C ultura l, S ocia l N orm s
Inform al
C ap ita l
O p p ortu n ity
F or N ew B usine ss
E n tre p ren eu rial C ap acity
•S kills & E xp erien ce
•M otiva tio n
N ew
b u sin esses
Global Entrepreneurship Monitor
A Classic Example of Entrepreneurial Financing:
1. Larry Page and Sergey Brin started Google in a Stanford University
dorm room and financed it with credit cards.
Global Entrepreneurship Monitor
A Classic Example of Entrepreneurial Financing:
1. Larry Page and Sergey Brin started Google in a Stanford University
dorm room and financed it with credit cards.
2. 2 years later had a working prototype and raised $100,000 from
Andy Bechtolsheim, a founder of Sun Microsystems, and $900,000 from
family and friends.
Global Entrepreneurship Monitor
A Classic Example of Entrepreneurial Financing:
1. Larry Page and Sergey Brin started Google in a Stanford University
dorm room and financed it with credit cards.
2. 2 years later had a working prototype and raised $100,000 from
Andy Bechtolsheim, a founder of Sun Microsystems, and $900,000 from
family and friends.
3. 3 ½ years after its founding, Google raised $25 million from venture
capitalists.
Global Entrepreneurship Monitor
A Classic Example of Entrepreneurial Financing:
1. Larry Page and Sergey Brin started Google in a Stanford University
dorm room and financed it with credit cards.
2. 2 years later had a working prototype and raised $100,000 from
Andy Bechtolsheim, a founder of Sun Microsystems, and $900,000 from
family and friends.
3. 3 ½ years after its founding, Google raised $25 million from venture
capitalists.
4. 8 ½ years after founding, Google raised $1.67 billion with an
Initial Public Offering (IPO)
Global Entrepreneurship Monitor
A Classic Example of Entrepreneurial Financing:
1. Larry Page and Sergey Brin started Google in a Stanford University
dorm room and financed it with credit cards.
2. 2 years later had a working prototype and raised $100,000 from
Andy Bechtolsheim, a founder of Sun Microsystems, and $900,000 from
family and friends.
3. 3 ½ years after its founding, Google raised $25 million from venture
capitalists.
4. 8 ½ years after founding, Google raised $1.67 billion with an
Initial Public Offering (IPO)
Financing Filters: 3Fs to IPO
Based on 2004 data
Founders
$200 billion
Family
Friends
$70 Billion
3,000,000
Ventures
0 – 2 years
0 – 4 years
0.5 – 4 years
Company Age
8 years
© 2006 Copyright William Bygrave
Financing Filters: 3Fs to IPO
Based on 2004 data
Founders
$200 billion
Family
Friends
$70 Billion
Business
Angels
$30 billion
50,000
Ventures
3,000,000
Ventures
0 – 2 years
0 – 4 years
0.5 – 4 years
Company Age
8 years
© 2006 Copyright William Bygrave
Financing Filters: 3Fs to IPO
Based on 2004 data
Founders
$200 billion
Family
Friends
$70 Billion
Business
Angels
$30 billion
50,000
Ventures
Venture Capitalists
$4.4 billion
Initial Investments
799
Ventures
3,000,000
Ventures
0 – 2 years
0 – 4 years
0.5 – 4 years
Company Age
8 years
© 2006 Copyright William Bygrave
Financing Filters: 3Fs to IPO
Based on 2004 data
Founders
$200 billion
Family
Friends
$70 Billion
Business
Angels
$30 billion
50,000
Ventures
Venture Capitalists
$4.4 billion
Initial Investments
799
Ventures
IPOs
$8.4 billion
84
Ventures
3,000,000
Ventures
0 – 2 years
0 – 4 years
0.5 – 4 years
Company Age
8 years
© 2006 Copyright William Bygrave
0.0
PERU
CHINA
ICELAND
COLOMBIA
DOMINICAN REP.
CHILE
UAE
HONG KONG
THAILAND
USA
FRANCE
NORWAY
SWITZERLAND
KAHAKHSTAN
TURKEY
LATVIA
URUGUAY
PORTUGAL
SERBIA
ARGENTINA
FINLAND
SPAIN
VENEZUELA
GREECE
BELGIUM
ITALY
DENMARK
SLOVENIA
SWEDEN
IRELAND
ROMANIA
PUERTO RICO
AUSTRIA
CROATIA
ISRAEL
NETHERLANDS
RUSSIA
UK
JAPAN
BRAZIL
Pecent of adults 18-64 years old
Global Entrepreneurship Monitor
Prevalence Rate of Informal Investors, Adults 18-64 years old
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
PERU
CHINA
ICELAND
COLOMBIA
DOMINICAN REP.
CHILE
UAE
HONG KONG
THAILAND
USA
FRANCE
NORWAY
SWITZERLAND
KAHAKHSTAN
TURKEY
LATVIA
URUGUAY
PORTUGAL
SERBIA
ARGENTINA
FINLAND
SPAIN
VENEZUELA
GREECE
BELGIUM
ITALY
DENMARK
SLOVENIA
SWEDEN
IRELAND
ROMANIA
PUERTO RICO
AUSTRIA
CROATIA
ISRAEL
NETHERLANDS
RUSSIA
UK
JAPAN
BRAZIL
Pecent of adults 18-64 years old
Global Entrepreneurship Monitor
Prevalence Rate of Informal Investors, Adults 18-64 years old
14.0
12.0
10.0
8.0
6.0
4.0
2.0
Global Entrepreneurship Monitor
Annual Amount per Informal Investor vs GDP (PPP) per Capita
Amount per informal investor US$
45,000
y = 0.0008x1.5944
R² = 0.7009
40,000
ICELAND
35,000
30,000
25,000
20,000
15,000
USA
10,000
5,000
0
0
10,000
20,000
30,000
GDP (PPP) per capita
40,000
50,000
60,000
Global Entrepreneurship Monitor
Annual Amount per Informal Investor vs GDP (PPP) per Capita
Amount per informal investor US$
45,000
y = 0.0008x1.5944
R² = 0.7009
40,000
ICELAND
35,000
DK
30,000
25,000
SE
20,000
15,000
USA
10,000
NO
5,000
FI
0
0
10,000
20,000
30,000
GDP (PPP) per capita
40,000
50,000
60,000
0.0
ICELAND
CROATIA
HONG KONG
URUGUAY
CHILE
THAILAND
TURKEY
GREECE
DOMINICAN REP.
COLOMBIA
FRANCE
LATVIA
BELGIUM
NETHERLANDS
PORTUGAL
SWITZERLAND
ITALY
DENMARK
UAE
SLOVENIA
USA
IRELAND
SERBIA
ARGENTINA
PERU
SWEDEN
AUSTRIA
SPAIN
ISRAEL
JAPAN
UK
PUERTO RICO
KAHAKHSTAN
NORWAY
FINLAND
ROMANIA
VENEZUELA
RUSSIA
BRAZIL
Informal Investment as percent of GDP
Global Entrepreneurship Monitor
Amount of Informal Investment as a Percent of GDP
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
ICELAND
CROATIA
HONG KONG
URUGUAY
CHILE
THAILAND
TURKEY
GREECE
DOMINICAN REP.
COLOMBIA
FRANCE
LATVIA
BELGIUM
NETHERLANDS
PORTUGAL
SWITZERLAND
ITALY
DENMARK
UAE
SLOVENIA
USA
IRELAND
SERBIA
ARGENTINA
PERU
SWEDEN
AUSTRIA
SPAIN
ISRAEL
JAPAN
UK
PUERTO RICO
KAHAKHSTAN
NORWAY
FINLAND
ROMANIA
VENEZUELA
RUSSIA
BRAZIL
Informal Investment as percent of GDP
Global Entrepreneurship Monitor
Amount of Informal Investment as a Percent of GDP
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
Global Entrepreneurship Monitor
Amount of Money to Start a Business
Amount to start a business US$
250,000
y = 2.6154x0.9964
R² = 0.5488
200,000
150,000
100,000
50,000
0
0
10,000
20,000
30,000
40,000
GDP (PPP) per capita US$
50,000
60,000
Global Entrepreneurship Monitor
Amount of Money to Start a Business
Amount to start a business US$
250,000
y = 2.6154x0.9964
R² = 0.5488
200,000
150,000
100,000
50,000
0
0
10,000
20,000
30,000
40,000
GDP (PPP) per capita US$
50,000
60,000
Global Entrepreneurship Monitor
Amount of Money to Start a Business
Amount to start a business US$
250,000
y = 2.6154x0.9964
R² = 0.5488
200,000
150,000
DK
100,000
NO
SE
50,000
FI
0
0
10,000
20,000
30,000
40,000
GDP (PPP) per capita US$
50,000
60,000
Global Entrepreneurship Monitor
Self-Funding by U.S. Entrepreneurs
• Entrepreneurs themselves provide 67.9% of the capital for
their new ventures.
• Total capital needed to start a new venture is $62,594.
• Entrepreneurs provide $42,501.
• External informal investors provide $20,093.
RUSSIA
PERU
FINLAND
ARGENTINA
BRAZIL
NORWAY
THAILAND
ITALY
JAMAICA
MEXICO
COLOMBIA
SOUTH AFRICA
TURKEY
PHILIPPINES
JAPAN
LATVIA
CZECH REPUBLIC
SWEDEN
IRELAND
SLOVENIA
ICELAND
CROATIA
SPAIN
UNITED STATES
UNITED KINGDOM
URUGUAY
GERMANY
MALAYSIA
CANADA
FRANCE
DENMARK
UAE
INDIA
SINGAPORE
BELGIUM
AUSTRALIA
CHILE
CHINA
GREECE
HUNGARY
NETHERLANDS
INDONESIA
Global Entrepreneurship Monitor
Percent of Nascents Fundable with Available Informal Investment
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
RUSSIA
PERU
FINLAND
ARGENTINA
BRAZIL
NORWAY
THAILAND
ITALY
JAMAICA
MEXICO
COLOMBIA
SOUTH AFRICA
TURKEY
PHILIPPINES
JAPAN
LATVIA
CZECH REPUBLIC
SWEDEN
IRELAND
SLOVENIA
ICELAND
CROATIA
SPAIN
UNITED STATES
UNITED KINGDOM
URUGUAY
GERMANY
MALAYSIA
CANADA
FRANCE
DENMARK
UAE
INDIA
SINGAPORE
BELGIUM
AUSTRALIA
CHILE
CHINA
GREECE
HUNGARY
NETHERLANDS
INDONESIA
Global Entrepreneurship Monitor
Percent of Nascents Fundable with Available Informal Investment
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Global Entrepreneurship Monitor
Relationship of Informal Investor to Entrepreneur
Relationship:
Percent
Investor-Entrepreneur
total
Close family
49.4%
Other relative
9.4%
Work colleague
7.9%
Friend, Neighbor
26.4%
Stranger
6.9%
Global Entrepreneurship Monitor
Relationship of Informal Investor to Entrepreneur
Relationship:
Percent Mean Amount
Investor-Entrepreneur
total Invested US$
Close family
49.4%
23,190
Other relative
9.4%
12,345
Work colleague
7.9%
39,032
Friend, Neighbor
26.4%
15,548
Stranger
6.9%
67,672
24,202
Global Entrepreneurship Monitor
Relationship of Informal Investor to Entrepreneur
Relationship:
Percent Mean Amount
Median
Investor-Entrepreneur
total Invested US$ Payback time
Close family
49.4%
23,190
2 Years
Other relative
9.4%
12,345
2 Years
Work colleague
7.9%
39,032
2 Years
Friend, Neighbor
26.4%
15,548
2 Years
Stranger
6.9%
67,672
2 - 5 Years
24,202
2 Years
Median
X return
1x
1x
1x
1x
1.5 x
1x
Global Entrepreneurship Monitor
Expected IRR for
Informal Investors
60%
Percent of Entrepreneurs &
Informal Investors
Entrepreneurs
50%
Informal Investors
40%
30%
20%
10%
0%
≤0%
0 - 10%
10 - 20%
20 - 40%
Expected IRR
40 - 100%
≥100%
Global Entrepreneurship Monitor
Expected IRR for Entrepreneurs
60%
Percent of Entrepreneurs &
Informal Investors
Entrepreneurs
50%
Informal Investors
40%
30%
20%
10%
0%
≤0%
0 - 10%
10 - 20%
20 - 40%
Expected IRR
40 - 100%
≥100%
Global Entrepreneurship Monitor
Expected IRR for Entrepreneurs &
Informal Investors
60%
Percent of Entrepreneurs &
Informal Investors
Entrepreneurs
50%
Informal Investors
40%
30%
20%
10%
0%
≤0%
0 - 10%
10 - 20%
20 - 40%
Expected IRR
40 - 100%
≥100%
2.50
Hungary
Finland
Norway
Portugal
Slovenia
France
Ireland
UK
Japan
Italy
Belgium
Sweden
Australia
South Africa
Hong Kong
Spain
USA
Germany
Netherlands
Denmark
Canada
Israel
Switzerland
Singapore
Poland
Greece
New Zealand
Informal investment and classic
venture capital as percent of GDP
Global Entrepreneurship Monitor
Title (Put
chart
below)
Informal
Investment
and Classic Venture Capital,
Percent of GDP
3.00
Classic venture capital
Iceland 3.5%
Informal investment
2.00
1.50
1.00
0.50
0.00
Slovenia
Greece
Switzerland
Japan
Hungary
Germany
Poland
China
Belgium
Italy
Ireland
New Zealand
Netherlands
Iceland
Hong Kong
France
Norway
Portugal
UK
Australia
Singapore
Denmark
Spain
Sweden
Canada
Finland
USA
South Africa
Israel
Classic Venture Capital Percent GDP
Global Entrepreneurship Monitor
Classic Venture Capital as Percent of GDP
0.45
0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
Global Entrepreneurship Monitor
Amount of Classic Venture Capital USA and Other
GEM nations
Other GEM
nations
$11.1 billion
38%
USA
$18.07 billion
62%
Global Entrepreneurship Monitor
Number of Companies Receiving Classic Venture Capital
Other GEM
nations
9,269
81%
USA
2,227
19%
Classic venture capital per company US$ 1,000
0
Iceland
Greece
Japan
Ireland
Belgium
Slovenia
Hungary
Norway
Sweden
Finland
Germany
Denmark
New Zealand
South Africa
UK
Singapore
Portugal
Australia
France
Netherlands
Canada
Poland
Spain
Israel
Italy
USA
Global Entrepreneurship Monitor
Classic Venture Capital Invested per Company
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
Global Entrepreneurship Monitor
Classic Venture Capital, US$ billion
Classic Venture Capital Invested
in High-Technology Sectors
7
6
5
4
Other GEM nations
3
USA
2
1
0
Biotechnology
Computer
Software &
Hardware
Communications
Global Entrepreneurship Monitor
Classic Venture Capital, US$ billion
Classic Venture Capital Invested
in High-Technology Sectors
7
6
17%
5
83%
4
19%
3
81%
27%
Other GEM nations
73%
2
1
0
Biotechnology
Computer
Software &
Hardware
Communications
USA
Global Entrepreneurship Monitor
Number of High-Technology Companies Receiving All
Stages of Venture Capital in G7 Nations
Number of companies
7,000
6,000
5,000
4,000
Other G7
3,000
USA
2,000
1,000
0
High-technology
Global Entrepreneurship Monitor
Number of High-Technology Companies Receiving All
Stages of Venture Capital in G7 Nations
Number of companies
7,000
6,000
5,000
67%
4,000
Other G7
3,000
USA
2,000
1,000
33%
0
High-technology
Global Entrepreneurship Monitor
Venture capital invested per company
US$ million
Amount of All Stages of Venture Capital Invested
per High-Technology Company in G7 Nations
9
8
7
6
5
4
3
2
1
0
USA
5.6
5.6 xx
Other G7 Nations
Global Entrepreneurship Monitor
VC Funds Raised Allocated to High-Tech
Europe and U.S.A, Percent GDP, 2004
0.18
0.16
0.12
0.1
0.08
0.06
0.04
Mean
Sweden
USA
Norway
Switzerland
France
Belgium
UK
Ireland
Germany
Hungary
Austria
Spain
Italy
Greece
0
Denmark
0.02
Netherlands
Percent GDP
0.14
Global Entrepreneurship Monitor
Summary: Iceland
Good News
Compared with other high-income nations
• Iceland ranks #1 in early-stage entrepreneurial activity.
Global Entrepreneurship Monitor
Summary: Iceland
Good News
Compared with other high-income nations
• Iceland ranks #1 in early-stage entrepreneurial activity.
• Iceland ranks #3 in high-growth expectation entrepreneurial activity.
Global Entrepreneurship Monitor
Summary: Iceland
Good News
Compared with other high-income nations
• Iceland ranks #1 in early-stage entrepreneurial activity.
• Iceland ranks #3 in high-growth expectation entrepreneurial activity.
• Iceland ranks #1 in the prevalence rate of informal investors.
Global Entrepreneurship Monitor
Summary: Iceland
Good News
Compared with other high-income nations
• Iceland ranks #1 in early-stage entrepreneurial activity.
• Iceland ranks #3 in high-growth expectation entrepreneurial activity.
• Iceland ranks #1 in the prevalence rate of informal investors.
• Iceland ranks #2 in the amount invested per informal investor.
Global Entrepreneurship Monitor
Summary: Iceland
Good News
Compared with other high-income nations
• Iceland ranks #1 in early-stage entrepreneurial activity.
• Iceland ranks #3 in high-growth expectation entrepreneurial activity.
• Iceland ranks #1 in the prevalence rate of informal investors.
• Iceland ranks #2 in the amount invested per informal investor.
• Iceland ranks #1 in the total informal investment as a percent of GDP.
Global Entrepreneurship Monitor
Summary: Iceland
Bad news
• Iceland is the by far the most expensive country for starting a business.
Global Entrepreneurship Monitor
Summary: Iceland
Good News
Compared with other high-income nations
• Iceland ranks #1 in early-stage entrepreneurial activity.
• Iceland ranks #3 in high-growth expectation entrepreneurial activity.
• Iceland ranks #1 in the prevalence rate of informal investors.
• Iceland ranks #2 in the amount invested per informal investor.
• Iceland ranks #1 in the total informal investment as a percent of GDP.
Bad news
• Iceland is the by far the most expensive country for starting a business.
Global Entrepreneurship Monitor
Implications & Recommendations
• Self-financing and informal investment are far and away
the most important sources of startup financing.
• If self-financing and informal investment dried up,
entrepreneurship would wither and die.
• On the other hand, if classic venture capital dried up,
entrepreneurship in general would continue to flourish.
• Classic venture capital is primarily an accelerant in the
commercialization of new products and services. It
seldom funds revolutionary research.
Global Entrepreneurship Monitor
Entrepreneurs
• Get your initial financing from yourselves, family,
friends, work colleagues, and strangers (4Fs).
• Don’t even think about classic venture capital at
the seed-stage. The odds on raising venture
capital for a seed-stage company are worse
than the odds on becoming a professional
athlete! Or winning $1 million or more in a
lottery!
Global Entrepreneurship Monitor
Policy Makers
• Give entrepreneurs and informal investors a tax
break and other incentives.
• Let classic venture capital take care of itself.
Just treat classic venture capital as an asset
class from the point of view of investors and
pension funds.
Global Entrepreneurship Monitor
Educators & Trainers
• Pay much, much more attention to self-funding
and informal investment as sources of seed
capital.
• Pay much less attention to classic venture
capital as a source of seed capital.
• Put much less emphasis on business plans and
business plan competitions that target venture
capital.
Global Entrepreneurship Monitor
Researchers
• Conduct far fewer studies of classic venture
capital and public stock markets as sources of
financing for entrepreneurs.
• Conduct far more studies of funding by informal
investors and self-funding by entrepreneurs
themselves.
Global Entrepreneurship Monitor
Acknowledgments
We thank to all the national team members who have
participated in GEM.
Global Entrepreneurship Monitor
Acknowledgments
We thank to all the national team members who have
participated in GEM.
We thank their national sponsors.
Global Entrepreneurship Monitor
Acknowledgments
We thank to all the national team members who have
participated in GEM.
We thank their national sponsors.
We thank the sponsors and supporters of GEM Global
for their generous support.
Global Entrepreneurship Monitor
Acknowledgments
We thank to all the national team members who have
participated in GEM.
We thank their national sponsors.
We thank the sponsors and supporters of GEM Global
for their generous support.
Global Entrepreneurship Monitor
Acknowledgments
Takk fyrir
We thank to all the national team members who have
participated in GEM.
We thank their national sponsors.
We thank the sponsors and supporters of GEM Global
for their generous support.
Global Entrepreneurship Monitor
Annual Planning Meeting, Babson College, 2006
Global Entrepreneurship Monitor
Rögnvaldur J Sæmundsson
Annual Planning Meeting, Babson College, 2006
Global Entrepreneurship Monitor
Founding & Supporting Institutions
www.gemconsortium.org
[email protected]
Global Entrepreneurship Monitor