Venture-backed companies in US Account for 17% of GDP and 10 million Jobs: Study

U.S. companies that received venture capital from 1970-2005 accounted for 10 million jobs and $2.1 trillion in revenues in 2005, according to a study conducted by Global Insight for the National Venture Capital Association (NVCA). This represents 9% of the total private sector work force and 16.6% of total U.S. GDP. Venture investment itself represents just 0.2% of U.S. GDP.  

The study found that venture-backed companies also outperformed their non-ventured counterparts between 2003 and 2005 with a 4.1% compound annual growth rate in jobs and an 11.3% compound annual growth rate in sales versus total private sector growth rates of 1.3% and 8.5% respectively. 

Some of the nation’s best known venture-backed companies include FedEx, Intel, Cisco, Starbucks, Genentech, Google, eBay, Apple and Home Depot. 

Venture-Backed Companies Outperform Across Industries

Biotechnology - Venture-backed biotech companies experienced 9.4 percent annual growth in employment from 2003 to 2005. Revenues at these companies totaled nearly $67 billion in 2005 – a compound annual growth rate of 16.4 percent compared to a 9.7 percent growth rate for the entire industry between 2003 and 2005. Additionally, revenues at venture-backed biotech companies accounted for 92 percent of all industry revenues in 2005.

Computers/Peripherals - Venture-backed companies dominate the computers and peripherals industry, accounting for nine out of every ten jobs (1.9 million) in the sector. These companies  recorded the largest revenue totals at $466 billion in 2005 – nearly 70 percent of the total industry’s revenue generation.

Software - The 2005 employment data show a heavy concentration of venture capital supported jobs in the software industry as well, with nearly 860,000 jobs – almost 90 percent of the total jobs in the sector. Venture-backed companies recorded $210 billion in sales in 2005, which represents more than 36 percent of the industry’s total revenues generated that year. 

Media/Entertainment/Retail – The largest venture-backed job creators are in the media/entertainment/retail industries, employing more than 2 million people in 2005 which reflects more than half of the entire industry’s employment. Venture-backed companies in this sector contributed nearly $300 billion in sales in 2005.

Venture-backed Companies Contribute to State and National Economies

While venture capital investment generates jobs and revenue in every state, there are pockets of the U.S. with strong levels of activity. California, Texas, Pennsylvania, Massachusetts, and Georgia were the states whose venture-backed companies contributed the most national jobs in 2005.

The study, entitled Venture Impact: The Economic Importance of Venture Capital Backed Companies to the U.S. Economy, was commissioned by the NVCA and conducted by Global Insight, a leading economic analysis and forecasting firm. Global Insight analyzed a database of nearly 23,500 U.S.-based companies that received venture capital financing between 1970 and 2005. From this database, Global Insight measured the employment and revenue contributions of these companies to the national economy. The data was further broken down by industry and by state.

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