July 26, 2004 -- Companies getting a hand from venture capitalists are driving the economy, according to a report by the National Venture Capital Association. Between 2000 and 2003, sales at VC-backed firms grew by 12 percent, while sales in the overall United States economy rose by only 6.5 percent.
These sales are nothing to scoff at either. The study says that VC-backed firms generated $1.8 trillion in sales in 2003, which accounted for 9.6 percent of total company sales.
In turn, these companies are generating jobs. Venture backed firms employed more than 10 million workers in 2003, or 9.4 percent of total private sector employment in the U.S. While the U.S. economy saw employment fall by 2.3 percent between 2000 and 2003, VC companies added 6.5 percent.
This study reports the good news. Another, as reported last week, paints a slightly less optimistic picture of the VC scene.
According to the Global Entrepreneurship Monitor, a joint research project of Babson College and the Kauffman Foundation, VC capital is drying up. Over the last three years, entrepreneurs reported VC funding declining 80 percent. This was a result of VCs being more selective in the companies they were throwing money behind. Private investors, fortunately, have been more than willing to pick up the slack.