Sources: National Science Foundation, “Invention, Knowledge Transfer, and Innovation 2022,” Supplemental Table 98, accessed August 3, 2022; Priyamvada Mathur, “Six Charts That Show 2021’s Record Year for US Venture Capital,” PitchBook, January 19, 2022.
Commentary: Per data collected by the National Science Foundation (NSF), the share of global venture capital (VC) going to U.S. businesses fell by over 33 percentage points between 2000 and 2020, from 79.8 percent to 46.6 percent. The United States’ largest share was 83.1 percent in 2003, and its smallest share was 38.2 percent in 2017.
This is not to suggest that VC is becoming a smaller part of the U.S. financial system. Far from it, as the growth rate in VC in the United States grew much faster in 2010-2020 than it did in 2000-2010 (2,221 percent and 164 percent, respectively). Rather, this statistic is indicative of the rapid rise of VC elsewhere. Global VC investments grew at an annual rate of 40.7 percent between 2010 and 2020, jumping from $9.1 billion to $277.0 billion. The regions that saw the largest relative increase in VC received were Central America ($0 in 2010 to $121 billion in 2020), South America ($6 million to $3.0 billion), and Asia excluding India and China ($83 million to $19.3 billion).
Although its estimates for 2020 differ somewhat from those of NSF, PitchBook reports that VC investments in U.S. firms nearly doubled between 2020 and 2021. With the current downturn in equities markets, of which the technology sector is taking the brunt, this trend is sure to reverse temporarily. After the dot-com bubble, VC investments did not return to their pre-crash level until 2006 (both in the U.S. and globally). Nonetheless, VC’s global rise has been staggering, especially over the last decade, and its importance is likely to increase as financial markets become more globalized and innovation hubs trying to follow in the footsteps of Silicon Valley continue to spring up.
