Beruflich Dokumente
Kultur Dokumente
V. Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234
Computation of the index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236
Statistical validation of the index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238
Table with sources and explanations of the data series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248
Foreword
from the research team
We are pleased to present the second edition of our Global Venture Capital
and Private Equity Country Attractiveness Index. The index seeks to measure
the attractiveness of countries for investors in venture capital (VC) and private
equity (PE) limited partnerships.
There are two notable changes with respect to the first index edition. First, we
have increased our coverage to 80 countries and include many more emerging
economies. Second, we have optimized the index structure and excellently
track real VC and PE market activity. This optimization also allows a better
interpretation of the VC and PE driving forces. However, we do not only present
evidence for a high explanatory power of our index with respect to investment
activity. We also analyze how aggregate country performance matches our index
ranking. This way, we demonstrate the quality of our composite measure and
its value to investors.
We invite your feedback to help us improve future index editions. In the future,
selected data series may be substituted by newer or more appropriate data.
Additional data could be added, while other series with poor explanatory power
can be deleted. The quality of data and the number of countries covered will
increase in future indices and as a result, our index remains a dynamic
research product that always considers the most relevant and recent data.
We believe this index is unique in providing information on the VC and PE capital
market segment with such a broad scope. We trust investors appreciate the
information generated to aid their decision-making; politicians may utilize
the index to benchmark their countries and to make improvements to attract
international risk capital.
We would not have been able to realize this project without contributions from
our sponsors, and we greatly appreciate the support of Ernst & Young and IESE
Business School, with their International Center for Financial Research (CIIF).
Website
Please visit our website http://blog.iese.edu/vcpeindex
where you will find more information, links to literature,
and several analytical tools for country benchmarking purposes.
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 7
Sponsors
We are grateful to our sponsors Ernst & Young and IESE
Business School/CIIF for their support, feedback and
their direct and professional contributions to the index.
8 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
About the editors
Prof. Alexander Groh Research team
Dr. Alexander Groh is Associate Professor and Accounting, the Journal of European
Alexander Groh
of Finance at EMLYON Business School, Financial Management, the Journal of
Associate Professor,
France. He held visiting positions at The Alternative Investments, and in Venture
EMLYON Business School,
University of New South Wales, Sydney, Capital. He is involved in training courses
groh@em-lyon.com
Australia, IESE Business School, Barcelona, for the European Venture Capital and Pri-
Spain, and INSEAD, Fontainebleau, France. vate Equity Association (EVCA), and has
Heinrich Liechtenstein
His research activities focus on VC and PE, worked for Quadriga Capital, a Frankfurt
Assistant Professor,
and include valuation issues, performance based Private Equity fund, since 1996.
IESE Business School Barcelona,
measurement and socio-economic deter- Dr. Alexander Groh was born in Frank-
hl@iese.edu
minants for the development of vibrant furt, Germany. He received a joint Master’s
VC and PE markets. His papers have been Degree of Mechanical Engineering and
Karsten Lieser
published in the Journal of Banking and Business Administration from Darmstadt
Project Manager,
Finance, the Journal of Corporate Finance, University of Technology, where he also
IESE Business School Barcelona,
the Journal of International Money and gained his Doctoral Degree in Finance.
klieser@iese.edu
Finance, the Quarterly Journal of Finance
Thomas Lang
Prof. Heinrich Liechtenstein Research Assistant,
IESE Business School Barcelona
Dr. Heinrich Liechtenstein is Assistant Pro- gies at Liechtenstein Global Trust, a family
fessor of Financial Management at IESE holding, and as a consultant at The Boston
Markus Biesinger
Business School, Barcelona – University Consulting Group. He has previously foun-
Research Assistant,
of Navarra, Spain. His areas of interest are ded and sold two companies.
IESE Business School Barcelona
entrepreneurial finance, VC and PE, wealth Dr. Liechtenstein was born in Leoben,
management and owners’ strategies. He is Austria, and received an MA in Business
Moritz Huismann
active in several supervisory and advisory Administration from the University of
Research Assistant,
boards of family holdings and founda- Graz, an MBA from IESE Business School,
IESE Business School Barcelona
tions, as well as a private equity firm. and a Doctoral Degree of Business and
Dr. Liechtenstein has experience in Economic Sciences from the University of
Florian Braun
wealth management and owners’ strate- Vienna.
Research Assistant,
IESE Business School Barcelona
Karsten Lieser
Sarp Vardarizi
Karsten Lieser is a Project Manager at the in the asset and fund management de-
Research Assistant,
IESE International Center for Financial partments of REInvest, SCM Strategic Ca-
IESE Business School Barcelona
Research (IESE CIIF) in Barcelona. He cur- pital Management, and AXA – Real Estate.
rently manages the Global VCPE Country Currently, Mr. Lieser is enrolled in a
Attractiveness Index project and works Ph.D. program in Finance at Darmstadt
on strategy and research assignments in University of Technology, Germany with
the Alternative Investment sector for va- a full-time research position at IESE Bu-
rious consultancy firms. The focus of his siness School Barcelona, Spain. He gra-
research is the investigation of determi- duated as Master in Business Administra-
nants of Venture Capital, Private Equity, tion and Civil Engineering from Darmstadt
and Real Estate investments and the de- University of Technology, Germany and
velopment of tools to guide investors on also studied at EPFL and HEC Lausanne,
their geographic asset allocation deci- Switzerland, and IESE Business School
sions. Prior to joining IESE CIIF, he worked Barcelona, Spain.
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 9
I. The Global VCPE Country
Attractiveness Index
10 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 11
I. The Global VCPE Country Attractiveness Index
12 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
What are institutional investors’ one single composite measure. The de- (1979) argues that a situation of economic
international VC and PE allocation cisive factors that render a country at- prosperity and development facilitates en-
criteria? tractive and the determinants of vibrant trepreneurship, as it provides a greater ac-
Our index addresses institutional investors’ VC and PE markets have been extensively cumulation of capital for investments. The
concerns and evaluates countries with res- studied. In our index we give a brief over- ease of start-ups is expected to be related
pect to their criteria for international VC view over the findings of these studies and to societal wealth, not solely due to the
and PE allocations. These criteria include, group the articles into six sub-chapters. availability of start-up financing, but also
in the first instance, the expected deal These sub-chapters reveal the structure of to higher income among potential cus-
opportunities in a country or region from our index: each heading represents one of tomers in the domestic market. However,
a macro perspective. Of course, they also six “key drivers” for the attractiveness of a GDP is measured in current market prices
include particular investment strategies of country for limited partners: that are affected by inflation. Therefore,
fund management teams, the general par- 1. Economic activity only real growth rates signal quality deal
tners’ competences, their track records and 2. Depth of the capital market opportunities arising from the economic
other parameters.1 The limited partners 3. Taxation development.
evaluate these determinants in their due 4. Investor protection and corporate
diligence process before committing to a governance Importance of the depth of the
particular general partner. However, these 5. Human and social environment capital market
criteria are beyond the scope of our index 6. Entrepreneurial culture and deal Black and Gilson (1998) discuss major dif-
because they depend on individual cases opportunities ferences between bank-centered and stock
and undisclosed data. market-centered capital markets. They
Another concern investors commu- These key drivers name and define a subset argue that well-developed stock markets,
nicated to us is the level of valuations in of criteria we need to assess for all of our which allow general partners to exit via
various countries. But, unfortunately, a sample countries.2 IPOs, are crucial for the establishment of
comparison of international transaction vibrant VC/PE markets. In general, bank-
multiples is impossible for us for two rea- Importance of economic activity centered capital markets show less ability
sons. First, little information exists on tran- Intuitively, the state of a country’s eco- to produce an efficient infrastructure that
saction multiples. Second, multiples reflect nomy affects its VC/PE market activity. An supports VC/PE deal-making. They affirm
the relationship between growth expecta- economy’s size and employment levels are that it is not merely the strong stock mar-
tions and opportunity cost of capital. It is also proxies for prosperity, the number of ket that is missing in bank-centered capital
not feasible for us to estimate these pa- its local corporations and entrepreneurial markets; it is also the secondary institu-
rameters for all our sample countries and activity, and hence, also for expected VC tions, including the bankers’ conservative
to find a correct benchmarking approach. and PE deal flow. Capitalizing on economic approach to lending and investing, and the
Our index follows a practical approach and growth requires investments and provides social and financial incentives that reward
points to the opportunities that should a rationale for institutional investors to entrepreneurs less richly (and penalize fai-
arise from the current socio-economic enter into certain countries. Gompers and lure more severely), that compromise entre-
environment in a country, and as a result, Lerner (1998) argue that more attractive preneurial activity. Jeng and Wells (2000)
contribute to the macro perspective of the VC and PE investment opportunities exist stress that IPO activity is the main force
capital allocation process. if an economy is growing quickly. Romain behind cyclical swings because it directly
Our index provides valuable informa- and van Pottelsberghe de la Potterie (2004) reflects the returns to the VC/PE funds.
tion to investors as it summarizes all the find that VC/PE activity is cyclical and si- Kaplan and Schoar (2005) confirm this.
important socio-economic factors into gnificantly related to GDP growth. Wilken Similar to Black and Gilson (1998), Gom-
pers and Lerner (2000) point out that risk
2. For a comprehensive review please refer to Groh, capital flourishes in countries with deep
1. For more details please refer to Groh, Alexander and Alexander, Liechtenstein, Heinrich and Lieser, Karsten
Liechtenstein, Heinrich (2011): The First Step of the Capital (2010): “The European Venture Capital and Private Equity and liquid stock markets. Likewise, Schert-
Flow from Institutions to Entrepreneurs: “The Criteria Country Attractiveness Indices”, Journal of Corporate ler (2003) uses either the capitalization
for Sorting Venture Capital Funds”, European Financial Finance, Volume 16, Issue 2, April 2010, pp. 205 – 224.
Management Journal, forthcoming. Related working papers Related working papers are available at http://ssrn.com/ of stock markets or the number of listed
are available at http://ssrn.com/author=330804 author=330804
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 13
I. The Global VCPE Country Attractiveness Index
companies as a measure for stock market tion to develop a vibrant capital market. Lazear (1990) and Blanchard (1997) dis-
liquidity and finds that it has a significant Glaeser et al. (2001) and Djankov et al. cuss how protection of workers can reduce
impact on VC and PE investments. (2003 and 2005) suggest that parties in employment and growth. It is especially
Alongside the disadvantages of bank- common-law countries have greater ease important for start-up and medium-size
centered capital markets, Greene (1998) in enforcing their rights from commercial corporations to respond quickly to chan-
emphasizes that low availability of debt contracts. ging market conditions. Black and Gilson
financing is an obstacle for start-ups Cumming et al. (2006) find that the (1998) argue that labor market restric-
in many countries. Entrepreneurs need quality of a country’s legal system is tions influence VC/PE activity, though not
to find backers — whether banks or VC/ more closely related to facilitating VC/PE to the same extent as the stock market.
PE funds — who are willing to bear risk. backed exits than the size of a country’s Djankov et al. (2002) investigate the
Cetorelli and Gambera (2001) provide stock market. Cumming et al. (2009) role of several societal burdens for start-
evidence that bank concentration pro- extend this finding and show that cross- ups in different countries. They conclude
motes the growth of those industrial sec- country differences in legality, inclu- that the highest barriers and costs are
tors that have a higher need for external ding legal origin and accounting stan- associated with corruption, crime, a larger
finance by facilitating credit access to dards have a significant impact on the unofficial economy and bureaucratic de-
younger companies. governance of investments in the VC/PE lay. It should be noted that this argument
industry. Desai et al. (2006) show, that is probably of particular importance in
Importance of taxation fairness and property rights protection some emerging countries with perceived
Bruce (2000 and 2002), and Cullen and largely determine the growth and emer- higher levels of corruption.
Gordon (2002) prove that tax regimes gence of new enterprises. Cumming and
matter for business entry and exit. Djan- Johan (2007) highlight the perceived Importance of entrepreneurial
kov et al. (2008) show that direct and in- importance of regulatory harmonization culture and deal opportunities
direct taxes affect entrepreneurial activi- with respect to increasing institutional The expectation about access to viable
ty. Poterba (1989) builds a decision model investor commitments to the asset class. investments is probably the most impor-
showing the advantages to becoming an La Porta et al. (2002) find a lower cost of tant factor for investors’ international
entrepreneur, driven by taxation incen- capital for companies in countries with risk capital allocations. Especially for
tives. Bruce and Gurley (2005) explain better investor protection, and Lerner the early stage segment, we expect that
that increases in the personal income tax and Schoar (2005) confirm these fin- the number of potential investments
can raise the probability of becoming an dings. Johnson et al. (1999) show that is related to the research output in an
entrepreneur: large differences between weak property rights limit the reinvest- economy. Gompers and Lerner (1998)
personal income tax rates and corporate ment of profits in start-up companies. show that both industrial and academic
tax rates provide an incentive for self-em- Finally and more broadly, Knack and research and development (R&D) expen-
ployment. Keefer (1995), Mauro (1995), and Svens- diture significantly correlates with VC
son (1998) demonstrate that property activity. Kortum and Lerner (2000)
Importance of investor protection rights significantly affect investments highlight that the growth in VC fundrai-
and corporate governance and economic growth. sing in the mid-1990s may have been due
Legal structures and the protection of to a surge of patents in the late 1980s
property rights strongly influence the Importance of the human and social and 1990s. Schertler (2003) emphasizes
attractiveness of a national VC/PE market. environment that the number of both R&D employees
La Porta et al. (1997 and 1998) confirm Black and Gilson (1998), Lee and Peterson and patents, as an approximation of the
that the legal environment determines (2000), and Baughn and Neupert (2003) human capital endowment, has a posi-
the size and extent of a country’s capi- argue that cultures shape both individual tive and highly significant influence on
tal market and local companies’ ability to orientation and environmental conditions, VC activity. Furthermore, Romain and
receive outside financing. They emphasize which may lead to different levels of en- von Pottelsberghe de la Potterie (2004)
the differences between statutory law and trepreneurial activity. Megginson (2004) find that start-up activity interacts with
the quality of law enforcement in some argues that, in order to foster a growing the R&D capital stock, technological op-
countries. Roe (2006) discusses and com- risk capital industry, the research culture portunities and the number of patents.
pares the political determinants of corpo- with respect to universities and national However, innovations and R&D are not
rate governance legislation for the major laboratories plays an important role. only important for early stage invest-
economies and focuses on the importance Rigid labor market policies negatively ment activity. Without sufficient R&D
of strong minority shareholder protec- affect the evolution of a VC/PE market. activity it will be impossible for esta-
14 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
blished businesses to create or maintain only competitive legal environments allow achieve a more comprehensive result and
market positions with strong products the development of the societal require- to facilitate interpretations.
and brands, which, once established, ments that support innovations, economic In a first step, we differentiate the six
attract private equity investors. growth, the capital market, and VC and key drivers from the foregoing review of
Despite the innovative output of a PE activity. There is a fourth alternative, prior research: economic activity, depth
society, Djankov (2002), and Baughn and which may be more relevant for emerging of the capital market, taxation, investor
Neupert (2003) argue that bureaucracy in economies: low taxes attract investors protection and corporate governance,
the form of excessive rules and procedural who provide financing for growth which human and social environment, and en-
requirements, multiple institutions from leads to modern and educated societies. trepreneurial culture and deal opportuni-
which approvals are needed and cumber- All lines of argument are reasonable ties. We confirm their choice via a survey
some documentation requirements, may and actually validated by the economic among institutional investors, reported
severely constrain entrepreneurial activity. development of various selected countries in Groh and Liechtenstein (2009) and
Lee and Peterson (2000) stress that the in different historic periods. Nevertheless, (2011), and base our index structure upon
time and money required to meet such it seems to be the combination of all these them. Unfortunately, none of these key
administrative burdens may discourage factors which need to be improved in pa- drivers is directly measurable, so we seek
new venture creations. rallel to increase VC and PE attractiveness data series that adequately express their
of countries and regions. For this reason, characters. Hence, we try to find the best
Summary on the determinants of we do not rely on a selection of a few possible proxies for the aforementioned
vibrant VC and PE markets parameters: for a country to receive a drivers of VC/PE activity, which must be
The research findings discussed above high index rank, it needs to achieve a high available for a large number of countries
emphasize the difficulty of identifying score on all of the individual criteria. The- at the same time.
the most appropriate parameters for our refore, we structure the determinants to
index. There is no consensus about a ran-
king of the criteria. While some parame-
ters are more comprehensively discussed,
and certainly of high relevance, it remains
unclear how they interact with others. For
example, it is arguable whether the VC/PE
activity in a country with a high corporate
governance level is affected more by the
liquidity of the national stock market or
by labor regulations.
While an IPO exit is, in principle, pos-
sible at any stock exchange in the world,
the labor market frictions in a particular
country can hardly be evaded. On the
other side, many of the criteria are highly
inter-correlated. Black and Gilson (1998)
call it a “chicken and egg” problem: it is
impossible to detect which factor causes
the other. One line of argumentation is
that modern, open and educated socie-
ties develop a legislation that protects
investors and property rights, which favor
the output of innovation and the deve-
lopment of a capital market. This leads to
economic growth and to demand for VC
and PE. However, the causality might be
reverse: economic growth spurs innova-
tion and the development of modern edu-
cated societies. There is a third suggestion:
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 15
I. The Global VCPE Country Attractiveness Index
Assessing six latent key drivers How we disaggregate the six key Finally, the individual weights for the
An important principle of our index is to as- drivers six key drivers depend on the number
sess the latent drivers of VC/PE attractiveness. According to the principal to assess latent of their level-2 constructs. For example,
These are criteria that are not directly ob- key drivers with observable data, we di- “1. Economic activity” consists of three
servable, but driven by others which can saggregate each one into sub-categories. level-2 constructs, “2. Depth of the capi-
be measured. For example, we assume in These sub-categories are either indivi- tal market” of seven, while “3. Taxation”
a first step that the VC/PE attractiveness of dual data series or constructs of seve- consists of only one. Overall, we use 22 le-
a country is determined by the six key dri- ral determinants that we name “level-2 vel-2 constructs for our index, and hence,
vers. However, as pointed out, the key drivers constructs.” For example, as documented “1. Economic activity” receives a weight of
themselves are not measurable but need to in Table 1, we split the key driver “2. Depth 3/22, which is 0.136, while the weight of
be estimated with sub-criteria. For example, of the capital market” into seven sub-ca- “2. Depth of the capital market” is 7/22,
it would be ideal to express the quality of tegories: which is 0.318, and for “3. Taxation” it is
the deal-making environment in a country 2.1. Size of the stock market 1/22 = 0.046, respectively.
by the number of investment banks, M&A 2.2. Stock market liquidity The advantage of this weighting scheme
boutiques, law firms, accountants and 2.3. IPO market activity is that the key drivers which include more
consultants. But, unfortunately, such data 2.4. M&A market activity level-2 constructs and hence, data series,
does not exist on a global scale. Our only 2.5. Debt and credit market gain more weight. That way, once again,
alternative is to gather more general infor- 2.6. Bank non-performing loans to total we diminish the effect of potential outliers
mation on the level of debt provided by the gross loans in our data.3
banking sector, or estimates about the per- 2.7. Financial market sophistication The final index structure results from
ceived sophistication of the financial system substantial optimization efforts. We find
and the ease of access to loans. We assume Data series 2.2 and 2.6 are provided by that any statistically “more advanced”
that these criteria affect the key driver, the Worldbank and data series 2.7 results techniques do not improve the index qua-
depth of the capital market. Even if they are from a survey initiated by the World Eco- lity. The weighting scheme assigns appro-
not perfect proxies, we claim that the better nomic Forum (WEF). However, the other priate emphasis according to the explana-
these criteria are developed, the more deal- indicators are constructs themselves. For tory power of the individual key drivers.
supporting institutions will exist to facilitate instance, we assess “2.3. IPO market ac- We will return to this topic in a later sec-
VC and PE activity. Hence, we assess a driver tivity” by the issued volume and by the tion of this index.
with observable data. This principle is main- number of issues. This approach has two
tained at all individual levels for the index major advantages. First, individual data Separate VC and PE indices
construction. An unobservable criterion series do not gain too much weight when To account for differences with respect to
is assessed with several proxy parameters. they are grouped, and this limits the im- the two market segments, VC vs. PE, we
In principle, we measure the attractiveness pact of outliers. Second, the overall results propose three related indices. The first
of a country by the six key drivers and use can be traced to more granulated levels one combines both segments (VCPE). The
several proxies for their assessment. and hence, allow better interpretation and second one focuses on early stage VC and
confirmation of the findings. the third index on later stage PE. When
calculating the individual VC and PE in-
The six key drivers
The weighting scheme dices we discard data series that are less
1. Economic activity We spent a great deal of time refining the important for either market segment.
2. Depth of the capital market statistical analyses and optimizing the
3. Taxation structure of the index. In this new opti-
4. Investor protection and corporate mized structure, we apply equal weights
3. Details about the possible statistical approaches
governance for all data series, when we aggregate to determine weights for the data series are provided in
5. Human and social environment them to the level-2 constructs. We use the academic paper Groh, Alexander, Liechtenstein,
Heinrich and Lieser, Karsten (2010): "The European
6. Entrepreneurial culture and deal equal weights for the level-2 constructs to Venture Capital and Private Equity Country Attractiveness
opportunities aggregate them on the next higher level Indices," Journal of Corporate Finance, Volume 16, Issue
2, April 2010, pp. 205 – 224. Related working papers are
of the six key drivers. available at http://ssrn.com/author=330804.
16 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Table 1: Structure of the VCPE Index, the separate VC, and PE Indices, and the weighting schemes
VCPE VC PE VCPE VC PE
Index Index Index Index Index Index
1 Economic Activity 0.14 0.16 0.19 5 Human and social environment 0.14 0.16 0.12
1.1 Gross Domestic Product 0.33 0.33 0.33 5.1 Education and human capital 0.33 0.33
1.1 Size of the economy (GDP) 0.33 0.33 0.33 5.1.1 Quality of the educational system 0.50 0.50
1.2 Medium-term real GDP growth 0.33 0.33 0.33 5.1.2 Quality of scientific research institutions 0.50 0.50
1.3 Unemployment 0.33 0.33 0.33 5.2 Labor market rigidities 0.33 0.33 0.50
2 Depth of the capital market 0.32 0.21 0.44 5.2.1 Difficulty of hiring index 0.25 0.25 0.25
2.1 Size of the stock market 0.14 0.25 0.14 5.2.2 Rigidity of hours index 0.25 0.25 0.25
2.1.1 Market capitalization of listed companies 0.50 0.50 0.50 5.2.3 Difficulty of firing index 0.25 0.25 0.25
2.1.2 Number of listed domestic companies 0.50 0.50 0.50 5.2.4 Firing costs 0.25 0.25 0.25
2.2 Stock market liquidity (trading volume) 0.14 0.25 0.14 5.3 Bribery and corruption 0.33 0.33 0.50
2.3 IPO market activity 0.14 0.25 0.14 5.3.1 Bribery and corruption Index 0.33 0.33 0.33
2.3.1 Market volume 0.50 0.50 0.50 5.3.2 Control of corruption 0.33 0.33 0.33
2.3.2 Number of IPOs 0.50 0.50 0.50 5.3.3 Extra payments/bribes 0.33 0.33 0.33
2.4 M&A market activity 0.14 0.25 0.14 6 Entrepreneurial culture and deal opportunities 0.22 0.26 0.06
2.4.1 Market volume 0.50 0.50 0.50 6.1 Innovation 0.20 0.20
2.4.2 Number of deals 0.50 0.50 0.50 6.1.1 General innovativeness index 0.50 0.50
2.5 Debt and credit market 0.14 0.14 6.1.2 Capacity for innovation 0.50 0.50
2.5.1 Domestic credit provided by banking sector 0.25 0.25 6.2 Scientific and technical journal articles 0.20 0.20
2.5.2 Ease of access to loans 0.25 0.25 6.3 Ease of starting and running a business 0.20 0.20
2.5.3 Credit information index 0.25 0.25 6.3.1 Number of procedures to start of business 0.20 0.20
2.5.4 Interest rate spread 0.25 0.25 6.3.2 Time needed to start a business 0.20 0.20
2.6 Bank non-performing loans to total gross loans 0.14 0.14 6.3.3 Costs of business start-up procedures 0.20 0.20
2.7 Financial market sophistication 0.14 0.14 6.3.4 Minimum capital requirements 0.20 0.20
3 Taxation 0.05 0.05 6.3.5 Administrative requirements 0.20 0.20
3.1 Tax incentives and administrative burdens 1.00 1.00 6.4 Simplicity of closing a business 0.20 0.20
3.1.1 Entrepreneurship incentive 0.33 0.33 6.4.1 Time for closing a business 0.33 0.33
3.1.2 Number of tax payments 0.33 0.33 6.4.2 Costs for closing a business 0.33 0.33
3.1.3 Time spent on tax issues 0.33 0.33 6.4.3 Recovery rate 0.33 0.33
4 Investor protection and corporate governance 0.14 0.16 0.19 6.5 Corporate R&D 0.20 0.20 1.00
4.1 Corporate governance 0.33 0.33 0.33 6.5.1 Company spending on R&D 0.50 0.50 0.50
4.1.1 Disclosure index 0.20 0.20 0.20 6.5.2 Utility patents 0.50 0.50 0.50
4.1.2 Director liability index 0.20 0.20 0.20
4.1.3 Shareholder suits index 0.20 0.20 0.20
4.1.4 Legal rights index 0.20 0.20 0.20
4.1.5 Efficacy of corporate boards 0.20 0.20 0.20
4.2 Security of property rights 0.33 0.33 0.33
4.2.1 Legal enforcement of contracts 0.33 0.33 0.33
4.2.2 Property rights 0.33 0.33 0.33
4.2.3 Intellectual property protection 0.33 0.33 0.33
4.3 Quality of legal enforcement 0.33 0.33 0.33
4.3.1 Judicial independence 0.20 0.20 0.20
4.3.2 Impartial courts 0.20 0.20 0.20
4.3.3 Integrity of the legal system 0.20 0.20 0.20
4.3.4 Rule of law 0.20 0.20 0.20
4.3.5 Regulatory quality 0.20 0.20 0.20
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 17
I. The Global VCPE Country Attractiveness Index
For the VC index, we regard the level-2 We find that several key drivers have VC and the combined VCPE index) because
construct “2.5. Debt and credit market” as a high importance for the state of a they are relevant on the level of the target
having minor importance and hence, dis- country’s VC and PE market while others firms. Similarly, we also discard the level-2
card it. We further delete “2.6. Bank non- are less important. Depth of the capital construct, measuring internet and com-
performing loans to total gross loans,” market has the highest explanatory power puter technology infrastructure, from our
and “2.7. Financial market sophistication” for cross-sectional VC and PE activity. This 2011 index.
from the VC index. key driver is followed by entrepreneu- Furthermore, again due to a lack of
For the PE index, we discard key driver rial culture and deal opportunities. Next correlation, we discarded GDP per capi-
“3. Taxation,” because the criteria consi- comes economic activity, investor pro- ta from our list of data series. If we fo-
dered are hardly relevant for the later tection and corporate governance on an cused on developed countries, individual
stage segment. Similarly, we drop “5.1. equal level, followed by human and social wealth would be an important indicator
Education and human capital” from the environment, then finally by taxation. This for VC and PE activity. However, including
human and social environment key driver decrease in importance is mirrored by the emerging economies, this data series is
and only keep “6.5. Corporate R&D” to as- weights we assign to the key drivers. The- contradictory as it has a strong negative
sess the deal opportunities related to cor- refore, the chosen index structure assures correlation with economic growth. The
porate proprietary research output. a weighting scheme that corresponds with fastest-growing VC and PE markets still
The weights for the individual index the actual impact of the six key drivers. have low GDP per capita ratios, and hence,
items in the separate VC and PE indices We did not follow this rigorous approach only one of the two drivers can be valid on
are determined in the same way. in the 2009/10 edition of the index, where a broad cross-sectional scope.
Table 1 presents the structures and we kept the weights of the six key drivers Finally, we discard the inflation rate
the weights of the individual data series, balanced. from our list of data series because using
as well as constructs for the combined Following the same rationale to im- real GDP growth we already control for
VCPE, and the separate VC and PE indices. prove the quality of the 2011 index, we inflation.
We provide more detailed information on discarded several data series we used in Beside the criteria that we need to ex-
the data series in the appendix. There, we the 2009/10 index. Notably, we deleted clude for their missing explanatory power
also explain the exact data aggregation some data series describing the tax envi- with respect to VC and PE activity, we
technique. ronment from the index. Surprisingly, we have discarded other data series with a
detected no correlation between margi- predominantly lower quality in their latest
Changes with respect to the prior nal corporate tax rates, profit and capital update. A few of the ready-made indices
index version gains taxes, and VC/PE activity across our and survey results we included in 2009/10
The proposed data series, the index struc- sample countries. First, tax rules depend on edition no longer qualified for their in-
ture and the applied weights result from the will of governments and are somehow clusion due to perplexing rankings and a
comprehensive analyses on the drivers of arbitrary, hardly correlating with other so- doubtful index quality.
VC and PE activity. Our goal is to provide cio-economic characteristics. Second, we As a consequence, we present a much
a framework for measuring a country’s interpret this as the consequence of gene- leaner index, based on 54 data series
attractiveness with respect to the VC and ral partners’ efforts to create transparent (compared to 66 data series in our 2009/10
PE asset classes. Not much prior academic deal and fund structures, so that national edition). The structure of the 2011 index
research has elaborated on this issue to such tax regimes do not affect the success of is more comprehensive and its statistical
a broad scope. Usually, the country samples VC/PE investments. The tax regimes are quality has increased.
of other researchers are not as large as in probably more important with respect to
our index, and our data also tracks many the location of limited partners’ head-
of the countries for a longer time period. quarters instead of the investee firms’. For
Therefore, we benefit from a remarkable this reason, we only rely on the data series
data collection allowing us to contribute to that evaluate entrepreneurial tax incen-
academic research on the topic. tives and administrative burdens (for the
18 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Africa (8): Algeria, Egypt, Kenya, Morocco, Namibia, The countries covered
Nigeria, South Africa, Tunisia We aim to cover as many countries as pos-
sible. The selection of the sample countries
Asia (16): Armenia, China, Hong Kong, India, is purely driven by data availability. We are
Indonesia, Japan, Kazakhstan, South Korea, able to increase our coverage from 66 in
Kyrgyzstan, Malaysia, Philippines, Russia, the 2009/10 edition to 80 countries for
Singapore, Taiwan, Thailand, Vietnam 2011. Unfortunately, the African conti-
nent is still under-represented with only
Australasia (2): Australia, New Zealand eight nations, but we hope to expand the
number in future index editions when
Eastern Europe (18): Albania, Bosnia-Herzegovina, Bulgaria, more data becomes available. We consider
Croatia, Czech Republic, Estonia, Georgia, the following 80 nations and assign them
Hungary, Latvia, Lithuania, Macedonia, to eight different geographic regions as
Moldova, Poland, Romania, Slovakia, they are defined by the International Mo-
Slovenia, Turkey, Ukraine netary Fund (IMF). The 14 “new entrants”
are highlighted.
Latin America (10): Argentina, Brazil, Chile, Columbia,
Ecuador, Mexico, Paraguay, Peru,
Uruguay, Venezuela
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 19
I. The Global VCPE Country Attractiveness Index
We gathered the individual data series Exhibit 1 presents the ranking of The Glo-
from Table 1 for our sample countries from bal VCPE Country Attractiveness Index 2011.
2000 onwards to most recent data retrie- The exhibit is open to debate. Some readers
ved by the end of 2010. We calculated the might argue that particular countries are
2011 index scores and realized that the US ranked too high, others too low. However, we
remains the most attractive for VC and PE note that the index ranking is the result of
allocations, retaining its ranking from the commonly available, transparent, aggrega-
2009/10 index. However, the distance to its ted socio-economic data, which is relevant
followers has decreased compared to last for investors in VC and PE assets. The results
year. This can be mainly attributed to the can be traced to the level of the individual
(economic) consequences of the financial data series, and hence, can be confirmed.
crisis. We rescale the US score to 100,4 and Please note, the underlying data is
its two followers, the United Kingdom and most the recent data available, but does
Canada catch up to a level of 93.3%, com- not include future projections. Therefore,
pared to 85.8% in 2010. we show the current attractiveness ran-
king and leave it to investors and advi-
sers to enrich the information we prepare
with their own knowledge, experience and
expectations upon which to draw their
conclusions.
20 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Exhibit 1: 2011 VCPE Country Attractiveness Index
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 21
I. The Global VCPE Country Attractiveness Index
22 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Rankings according to the separate creasing its rank by several places. The ra-
VC and PE indices tionale for these improvements is simple:
Exhibit 2 combines the VCPE index with competitive disadvantages with respect
the rankings according to the separate to education and innovation are no lon-
VC and PE indices. The triangles mark the ger considered, but the weight of the ca-
VCPE index ranks. The diamonds designate pital market key driver has increased at
the VC index and the squares represent the same time. As these countries have
the PE index ranks. (meanwhile) relatively deep capital mar-
The VC index country ranking does kets, their attractiveness for later stage
not change remarkably compared to the investment increases.
combined VCPE index ranking. It remains In contrast, we find that New Zealand,
stable because we do not alter the index Ireland, Slovenia, the Baltics and Tu-
structure to a great extent between the nisia lose several ranks focusing on PE
2009/10 and 2011 editions. However, we attractiveness. This can be mainly attri-
receive a much stronger ranking variation buted to two factors: a strong impact of
if we exclusively focus on the PE segment. the recent financial crisis and, resulting
For the PE index, we discard taxation from discarding competitive advantages
as well as constructs and data series that of these countries in the PE index, in par-
are related to education, high-tech inno- ticular with respect to taxation.
vation and starting or running businesses
in early stages. This results in Hong Kong,
China, South Africa, Taiwan, India, Bra-
zil, Bahrain, the Philippines and Peru in-
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 23
I. The Global VCPE Country Attractiveness Index
Comparisons of countries
The general pattern: what renders Exhibit 3 reveals four important im- Focusing on the developed countries
the US so attractive? plications. First, the United States (US) we find many economically strong na-
We broke down the index scores to the le- generally ranks ahead of other developed tions with vibrant entrepreneurial cultures
vel of the six key driving forces, and then economies (e.g., Germany) with respect to and deal opportunities, with an excellent
further down to the level-2 constructs in most of the six key drivers of VC and PE human capital and social environment.
order to enhance the discussion about the attractiveness, but especially to its capi- However, the finally decisive criteria for
ranking. We found a typical pattern with tal market. Second, emerging countries the lower score compared with the US are
respect to the attractiveness of countries (e.g., China) strongly attracts venture ca- the financial markets, and investor pro-
for VC and PE allocations. We demonstrate pital and private equity investors by their tection and corporate governance rules.
this pattern by comparing the first ranked economic growth. Third, many countries These findings point to the discussion
with the 10th and 20th ranked country, provide tax incentives that support en- about the competition of legal systems
namely the US, Germany and China. Ex- trepreneurial activity. Fourth, emerging and the relation between law and finance,
hibit 3 presents the key driver scores of countries score sometimes notably below as all strong countries score highly for the
Germany and China compared to the US the developed economies in terms of in- investor protection and corporate gover-
(which scores 100 for each key driver by vestor protection and corporate gover- nance key driver. Strong investor protec-
definition). nance, human and social environment, tion and corporate governance legislation
and entrepreneurial culture and deal op- spurs the development of a national ca-
portunities. This pattern becomes evident pital market, which is required for the es-
by further analyses which are presented tablishment of VC and PE deal supporting
in the appendix of this annual where institutions.
we benchmark every individual country
against the US.
1. Economic Activity
150
125
6. Entrepreneurial 100
2. Depth of Capital
Culture and Deal 75
Market
Opportunities 50
25
5. Human and
Social Environment 3. Taxation
24 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
We brake-down our analysis on the le- ver scores between the US and Germany by its liberal labor market, while per-
vel-2 constructs and provide more details results from a higher appreciation of the ceived bribery and corruption remains an
that support the detected general pattern. US’ corporate governance rules. On the investment obstacle in China. Finally, the
Exhibit 4 points to the distance between other side, Germany leads with respect to excellent score of the US for the entre-
the scores of the US, Germany and China several other criteria, in particular with an preneurial culture and deal opportunities
with respect to the level-2 constructs that advanced protection of property rights, a key driver is mainly related to academic
asses the capital market and corporate higher quality of the legal system, a lower research output and to the administrative
governance. It also reveals the extraor- perception of bribery and corruption, and simplicity and cost of starting, running
dinary state and growth of the Chinese regarding its general innovation capacity. and closing businesses.
economy, and its well developed capital In addition, the exhibit shows that the VC/
market. The difference of the investor pro- PE attractiveness of the human and social
tection and corporate governance key dri- environment in the US is mainly driven
Exhibit 4: level-2 constructs – comparison of the United States, Germany and China
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 25
I. The Global VCPE Country Attractiveness Index
Historic comparison — improvements sively due to its tremendous economic vestment environment, economic growth
of VCPE investment conditions and growth. Although this is a remarkable in- rates can be responsible for volatile ranks.
financial crisis impact crease of VC/PE attractiveness it should be At the other end of the exhibit, we
In order to demonstrate shifts in VCPE interpreted with some caution as, despite find those countries that lost ranking
country attractiveness, we compare the its growth, Brazil is only ranked number positions in the global competition. The
ranking for 2011 with 2007. It should be 43 in our index. For a further increase of Baltics, Turkey, Ireland, Romania, and Slo-
noted that some data series, e.g., the Ge- Brazil’s attractiveness, other key drivers vakia conclude the list of countries that
neral Innovation Index (GII) do not date need to be strengthened. This is equally decreased their ranks. For Turkey, the de-
back as far. However, we assume that valid for Indonesia. The country scores gradation results from a lack of economic
this and similar indicators did not change particularly low with respect to investor growth and from a deterioration with res-
substantially between 2007 and their protection and corporate governance (for pect to its human and social environment
first publication, and hence, keep them this key driver, Indonesia only ranks num- (relative to the other sample countries).
constant. ber 75), and the gain of ranking positions For Ireland, the Baltics, Romania and Slo-
The comparison presented in Exhi- is dominantly caused by its economic vakia, the downgrade is a direct conse-
bit 5 shows the rank changes (positive to growth. For Saudi Arabia, the rationale quence of the financial/economic crisis.
the right and negative to the left) of our is different. Not only economic growth Lacking economic growth is superimposed
sample countries between the 2007 and contributes to its more favorable ranking, by frozen debt markets and low capital
the 2011 index. It provides interesting in- Saudi Arabia substantially improved in all market activity. This result should alert in-
sights and reveals a strong increase of VC other important key drivers. vestors as these countries were highly ap-
and PE attractiveness for several countries, We continue with the interpretation preciated target countries for VC and PE
and the impact of the financial and econo- of Exhibit 5 and note that the increase investors in the past. However, the once
mic crisis on others. It should be stressed of ranking positions of Vietnam is caused expected economic growth did not mate-
that the index scores are calculated relative by the initiation of capital market acti- rialize on a sufficient scope; respectively,
to all other countries of the sample. That vity: stock market trading volume, M&A it was not sustainable without improving
means those countries that gained or lost and banking activity increased from very the general socio-economic environment
ranking positions did not necessarily im- low levels. This is also similar for Bahrain. as measured by the other key drivers. For
prove/deteriorate their investment condi- Exhibit 5 further reveals that all the this reason, a VC/PE bet on growth in a
tions in absolute terms. They might just Middle East countries substantially im- particular country is risky as the country
have outperformed/been outperformed by proved their rankings. In addition, the might fail to develop the appropriate in-
others in the international competition to North African countries, Tunisia and Mo- vestment environment at the same pace.
attract capital resources. rocco, experienced remarkable econo-
We find that Brazil, Saudi Arabia, and mic growth; this is equally valid for the
Indonesia are the “winners.” For an inter- Western European countries, Portugal and
pretation of this finding, we refer to the Germany. Taking Germany as an example,
detailed country analyses in the appendix the importance of the economic activity
of this annual and note that Brazil gains key driver should be noted. For countries
these 14 ranking positions almost exclu- with a general very favorable VC/PE in-
26 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Exhibit 5: rank changes between 2007 and 2011
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 27
I. The Global VCPE Country Attractiveness Index
Emerging countries,
and exceptional opportunities in BRIC?
Among the emerging economies, inves- ving forces of VC and PE attractiveness Exhibit 7 presents the scores of the le-
tors are paying particular attention to are often neglected. Exhibit 6 presents vel-2 constructs for the BRIC economies.
the development of the BRIC (Brazil, Rus- the six key drivers for the BRIC countries. It confirms China’s exceptional position
sian Federation, India and China) econo- As mentioned before, this pattern is very regarding its economic size and growth
mies. The expected economic growth and similar for most of the emerging markets. also compared to Brazil, the Russian Fede-
catch-up potential resulting from the size The exhibit reveals the skewness ration and India.
of their population, the availability of among the key driving factors of VC and However, likewise it reveals some
natural resources and transition to liberal PE attractiveness. All of the BRIC countries concerns about emerging market VC
markets justifies the exposure in BRIC. As are characterized by a peak with respect and PE. Issues with respect to corpo-
already noted, Brazil is the top performing to their economic activity. Nevertheless rate governance and the protection of
country in terms of its gain of overall the Russian Federation demonstrates only investors’ rights still remain investment
ranking positions between the 2007 and 89% of the economic activity key driver of obstacles in BRIC. Further, perceived bri-
2011 index versions, and China leads the the US. Despite the deep capital markets bery and corruption levels are high, while
ranking with respect to its exceptional in China and India, and the heterogeneous innovation and corporate R&D remains
economic growth. The pace of the eco- characteristics with regard to taxation, all relatively low. We know from the BRIC
nomic and capital market development, other key driver scores remain relatively and other emerging markets that growth
especially in China and India, is indeed low. This observation is confirmed by the and development is mainly concentrated
astonishing. However, the other key dri- scores of the level-2 constructs. in particular hubs or certain regions, but
not widespread. We also know that the
benefit of wealth creation is allocated to
Exhibit 6: the six key drivers for BRIC rather small fractions of the population
only. This presents not only a socio-eco-
1. Economic Activity nomic challenge for politicians in many
150 emerging countries, but is also reflected
125
in their attractiveness for VC and PE. If
6. Entrepreneurial 100
2. Depth of Capital
the countries cannot transfer the wealth
Culture and Deal 75
effects of growth to a broader part of
Market
Opportunities 50
their population it is unlikely to improve
25
the other key driving forces for VC and
0
PE attractiveness. If the pace of econo-
mic growth slows down, the countries will
deteriorate their VCPE attractiveness ran-
5. Human and king. This happened to the Russian Federa-
3. Taxation
Social Environment
tion, which lost four ranks as presented in
Exhibit 5, due to lower economic growth.
Brazil (43.) As previously argued, this is similar for
4. Investor Protection and Russian Federation (41.)
Corporate Governance India (30.)
the other emerging countries (the Baltics,
China (20.) Turkey, Romania, and Slovakia) ranked at
the bottom in Exhibit 5.5
28 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
In summary, BRIC and other emerging part of VC/PE business. Adding value and ging and developed VC and PE markets as
markets provide many investment oppor- exiting are at least of equal importance. exceptional growth opportunities come at
tunities and have strong needs to finance In fast-growth economies, the potential some cost. Finally, and this is particularly
their expected economic growth. Howe- of general partners to add value (other important for emerging markets because
ver, expected growth is often already than financing) might be limited. In ad- of their recent boom, the public stock
priced and does not allow extra profits. dition, successfully exiting transactions markets provide investment alternatives
It is also more challenging in emerging becomes difficult, even if public capital to capitalize on expected growth.
countries to get access to transactions be- markets are well developed, when the
cause of the immaturity of their deal sup- protection of investors is insufficient, and
porting institutional environment. Hence, when bureaucracy and perceived bribery
deal flow can be cumbersome and costly. and corruption lower the returns to inves-
Furthermore, we should acknowledge that tors. Limited partners should well consider
investing in corporations is only the minor advantages and disadvantages of emer-
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 29
I. The Global VCPE Country Attractiveness Index
Our index ranks the attractiveness of our index always provides the correct reason: some financial centers serve as
countries to receive VC/PE allocations answer to these questions. But, we sub- hubs and channel VC and PE abroad.
from institutional investors based on mit that it is very helpful in this respect. Investors allocate their capital in these
many socio-economic data series. The Therefore, we expect deviations between hubs because they rely on the efficiency
composite measure can deviate from our attractiveness measure and actual VC of the financial community there. This is
the actual risk capital market activity and PE activity in the particular countries exactly what we try to measure with our
and these deviations might point to an to be at a minimum level. index. In fact, we focus on the demand
inaccuracy of our measure. With respect To analyze the tracking power of for VC and PE in a particular economy,
to their allocations, investors are often our index, we compare the index scores and likewise on the state of the profes-
influenced by herding behavior and fol- with the actual VC and PE activity in the sional financial community that supports
low trends to certain countries and various countries, using the data from the supply side and directs the funds
regions. However, the countries might Thomson Financial. Our activity measure to the investee corporations. Therefore,
not have sufficiently developed “VC/PE is the natural logarithm of an average of investments according to the location
infrastructure” to absorb the committed all VC and PE investments made by the of the general partners correspond best
capital, leading to over-funding. The VC/ general partners in a certain country over to the concept of our index. In addition,
PE infrastructure is exactly what we aim the last three years. We use the natural we use investments — and not raised
to assess with our index: can we expect logarithm to account for the large acti- funds — because our index measures the
sufficient deal opportunities resulting vity divergence (e.g., activity in the US vs. “absorption capacity” (either caused by
from the entrepreneurial culture in a several emerging countries), and we use direct local demand or by channeling
country, from its economic soundness, or an average over three years to smooth funds abroad) of the particular econo-
from innovations? Are potential transac- fluctuations. Especially for some emer- mies. Funds raised might deviate from
tions efficiently supported by the finan- ging countries, annual activity fluctuates this capacity due to herding behavior of
cial community? Are the public stock and strongly from peak levels to zero in sub- investors, caused by over-optimism or
M&A markets liquid enough to facilitate sequent years. We chose the criterion “lo- negligence.
divestments? Are investors’ concerns le- cation of the general partners” — and not
gally taken care of? We do not claim that of the investments — for the following
30 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Exhibit 8: tracking power of our index
1,000,000
100,000
Three years average of VC and PE investments
by general partners per country [USD mn]
10,000
1,000
100
10
0
10 20 30 40 50 60 70 80 90 100 110
The statistical measure for such a com- Nevertheless, we could still improve the financing” instead of VC transactions. Simi-
parison is the Pearson correlation coeffi- tracking power of the index due to our op- larly, some investments in later stage com-
cient. It ranges between 0 and 1, where 0 timization effort and the slight changes of pany life cycles rather resemble “expansion
signals “no” and 1 “perfect tracking.” The the index structure and weights in the 2011 or development capital” than traditional
coefficient for our index is 0.8336, signa- version. If we compare the results of our buyout structures. Also for this reason of
ling that the index performs well when VC index with VC activity (only), the corre- varying definitions of VC/PE among the
tracking a country’s investment activity. lation is 0.8242. The correlation of our PE globe, we determine the combined Global
However, it is calculated including only index with actual PE activity is 0.8347. All VC and PE Country Attractiveness Index
the 58 countries from our sample with these results can be considered excellent which provides a joint score for both asset
non-zero investment activity. We illus- from a methodological perspective and classes.
trate the high correlation in Exhibit 8. all correlations could be improved compa-
Exhibit 8 reveals the tracking power of red to the prior index version. However, it
our index. We plot the countries’ invest- should be noted that there are inhomoge-
ment activity on their index scores and neous definitions of VC and PE among the
can identify a strong link. We note that the globe. Especially in emerging countries,
prior 2009/10 index correlated with 0.8104 some transactions might better be called
which was already a very satisfying result. “infrastructure investments” or “project
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 31
I. The Global VCPE Country Attractiveness Index
Concurrent to the finding that our index PPMs. The figures are audited and inves- with the available data on VC/PE and on
performs well when tracking VC and PE tors trust them. However, only success- our global scope. In addition, an IRR is a
activity in countries, it is of particular ful general partners raise a subsequent capital and time weighted return measure
interest to analyze if it also corresponds fund and edit a PPM. Therefore, their use that requires a reinvestment assumption
with country performance. Unfortuna- is criticized by academic researchers, as and that has aggregation issues as descri-
tely, performance figures are still one of average performance figures from PPMs bed in Phalippou (2008). However, the IRR
the best kept secrets in the VC and PE are upward biased. Nevertheless, there is pitfalls are the same for all transactions
industry. The principle not to disclose no reason to believe that this upward bias and for all of our countries. Therefore,
information on returns is equally valid is different among particular countries. they do not affect our cross-sectional
in developed and in emerging markets. This means benchmarking countries is country benchmarking approach.
On top of that, the emerging VC and PE feasible because then countries are com- With these aggregate country perfor-
markets are young with a general low pared relative to each other and the ab- mance measures, we can analyze to what
activity (despite some exceptions) and solute terms are not important. extent our index not only tracks VC and
hence, only a very few transactions from Lopez-de-Silanes, Phalippou and Gotts- PE market activity but also the average re-
which achieved returns can be calcula- chalg (2010) put together from PPMs the turns. We can match the index scores of 49
ted. Therefore, an assessment of VC and most comprehensive database on VC and countries (thereof 24 emerging countries)
PE performance is even more challenging PE returns at the investment level contai- with their aggregate performance data.
for the developing countries than for the ning the performance and characteristics We find that the correlation between the
developed. Commercial data suppliers of 7,453 investments, thereof 1,694 in index scores and a country’s average gross
only provide very limited performance emerging countries. The first transaction internal rate of return is 0.56. This high
figures. The only means to get reliable considered was closed in 1971 and the last correlation is expressed in Exhibit 9, which
performance data on a sufficient scope prior to 2006. We are grateful to Ludovic represents the average of the country re-
for empirical analyses is via the exten- Phalippou for providing us with aggrega- turns and index scores when we group the
sive effort to collect private placement ted country returns from this database. countries into deciles with respect to their
memoranda (PPMs). A private placement These returns are compiled as the mean index scores.
memorandum is a document edited by a average of gross internal rates of return
general partner that raises a VC/PE fund of all transactions in a particular country.
and solicits capital commitments from We are aware that this is a rough estimate,
institutional investors. It is a marketing disregarding different transaction closing
document used for fundraising purpose. dates (fund vintage years), industries, deal
General partners provide information structures and development cycles of the
about their track records and the per- particular VC/PE markets. Unfortunately,
formance of individual transactions in controlling for these effects is impossible
32 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Exhibit 9: historic performance and our index
40%
Average IRR of 49 sample countries grouped into deciles
35%
30%
25%
20%
15%
10%
5%
0%
30 40 50 60 70 80 90 100
Exhibit 9 reveals that our index is not tions in any of them. We highlight that
only a valid proxy for VC and PE activity, the internal rates of returns collected by
it is also a good indicator for aggregate Lopez-de-Silanes, Phalippou and Gotts-
country returns. The averages of historic chalg (2010) are calculated gross of any
gross internal rates of return were actual- fees. We can assume that fees are higher
ly larger in countries that rank higher in for investors in markets with less compe-
our index than in countries that rank low. tition among general partners. Therefore,
Nevertheless, there are “outliers,” meaning we expect the less competitive emerging
low ranked countries with high returns markets to be more costly for investors.
and vice versa. Additionally, of course, This effect supports our result and should
there is a strong dispersion of returns increase the correlation if we considered
within the particular countries, driven by net returns to investors.
the existence of very successful transac-
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 33
I. The Global VCPE Country Attractiveness Index
We provide a composite measure that We find a general pattern if we com- Emerging VC and PE provides interes-
determines the attractiveness of 80 pare the country characteristics. There is a ting opportunities to investors. However,
countries to receive capital allocations lot of dispersion with respect to the six key it is the discussed lack of balance of the
from investors in the VC and PE asset drivers. Some countries attract investors key driving forces that renders emerging
class. The composite measure is based on with tax incentives. Many countries show VC/PE allocation decisions challenging.
six main criteria: economic activity, depth strong entrepreneurial culture and deal Exceptional growth opportunities come
of the capital markets, taxation, investor opportunities. There is great dispersion in at the cost of disadvantageous conditions
protection and corporate governance, the economic activity, especially with respect with respect to investors’ protection, less
human and social environment, and entre- to the emerging markets and in the human liquid exit markets, innovation capacity
preneurial culture and deal opportunities. and social environment. However, the two and perceived bribery and corruption.
The definition of these criteria is based on key criteria, investor protection and cor- We invite you to observe and thorou-
an extensive review of academic literature porate governance, and depth of capital ghly analyze our results. If you are an
and on a survey we conducted among markets, make the difference. The com- investor, please enrich the provided in-
institutional investors prior to our study. mon law countries dominate the others formation with your own expertise and
The six criteria are not directly observable, regarding these criteria. We can conclude knowledge about the key driving forces
so we use proxy variables to assess them that strong investor protection and cor- and market conditions in the particular
for each country. As a result, we receive porate governance rules lead to liquid and countries to make your allocation deci-
a country ranking, as well as provide efficient capital markets, and these evoke sions. If you are a politician, please use our
detailed analyses on the strengths and the required professional community to analyses as demonstration how investors
weaknesses of the particular nations and secure deal flow and exit opportunities for evaluate and benchmark your country. If
information on the historic development VC and PE funds. This ultimately affects you are a researcher, and this is equally
of the criteria. Our index performs well a country’s attractiveness for institutional valid for the whole constituency, please
when tracking real VC and PE activity and investments in the VC and PE asset class. do not hesitate to criticize our approach
historic aggregate country performance. However, this discussion reflects the and findings. We will continue to update
However, it must not be interpreted as a capital supply side only. We should also our index annually.
crystal ball for investment advisers. We take into account that, as revealed by As the index evolves, we aim to cover
highlight our intention to challenge the our analyses, many countries lack several more countries, assuming the right data is
discussion about the determinants of vi- important characteristics. Without a suf- available. We will include new data series
brant VC and PE markets and to propose ficient entrepreneurial culture and deal (discard others), and further optimize the
a valuable informational tool, but not an opportunities, with rigid labor markets, data selection and index structure. Hence,
arbitrage instrument. bribery and corruption, there will be first, we very much appreciate any critique and
less demand for VC and PE and second, re- comment.
turns to investors diminish.
34 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 35
II. How are fund size and fund
performance related?
36 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 37
II. How are fund size and fund performance related?
First, we provided new descriptive statis- six years, which account for nearly 18% of consistent driver of returns. Casual evi-
tics and stylized facts on the distribution all PE investments, had a median IRR (PME) dence suggests that the scale of PE firms is
of performance, duration and size of PE of only 8% (0.79). an important concern for investors. Lerner
investments around the world. We found a Our statistics uncovered additio- et al. (2005) argue that “the unprecedented
dramatic dispersion in the rate of returns: nal stylized facts for investments across growth of the private equity industry
investments in the 75th percentile have countries. We documented substantial appears to have changed the industry in
an internal rate of return (IRR) of 50%, underperformance of investments in emer- some permanent ways. First was the scale
whereas those in the 10th percentile earn ging markets, which may be of interest at which private equity groups operated.
nothing. Most investments in our dataset given their recent spectacular growth These concerns were particularly acute on
are relatively long-lived, with the median surges. The data also allowed us to show, the buyout side, where multi-billion-dol-
duration of the investments being nearly for the first time, that most PE invest- lar funds have become the norm.” Along
four years. But evidence emerged from our ments around the world are small equi- similar lines, Swensen et al. (1999) repor-
analysis that the long-lived investments ty-wise. The median equity investment is ted that “many LBO firms appear to have
are not the ones that deliver high returns. US$10 million only. The large deals trum- explicitly lowered their return hurdles […],
In fact, we observed a strong negative as- peted in the press are, by far, the exception. pricing deals to yield returns in the mid-
sociation between performance and dura- Second, we identified the drivers behind to-high teens.” Indeed, the current scale
tion. Quick flips (investments held less than the great variation in the performance of of several PE firms contrasts sharply with
two years), which account for 12% of all PE PE investments. Our investment-level data that of PE firms 20 years ago. When com-
investments, have median IRR (Public Mar- allowed us to document the performance paring the 16 professionals at KKR and the
ket Equivalent [PME]) of 85% (1.94), whe- impact of several investment and PE firm 470 at RJR Nabisco’s headquarters, Jensen
reas investments that were held more than characteristics. We found that the small (1989) suggested that PE firms were posi-
investments outperformed the larger ones. tioned to generate superior performance
In addition, and contrary to some of the partly because they were lean and focused
Guest contribution by:
arguments by fund managers, our results organizations.
show a close connection between public Today, the industry is more concentra-
Ludovic Phalippou
and private equity: the average stock-mar- ted (Cornelius et al. 2007) and PE firms
Associate Professor of Finance
ket return over the life of an investment sometimes have hundreds of professionals
University of Oxford Said Business School
has a significant impact on IRR. from a variety of backgrounds doing a
ludovic.phalippou@gmail.com
Our most important finding, however, large number of deals around the world.
is that PE firm scale is a significant and Blackstone, a prominent PE firm, des-
38 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
cribes itself as: “A firm of 1,300 professio- This means that, if a firm turns out to be We performed a series of tests which
nals in 15 offices worldwide. But we are too big, it takes a few years for investors corroborated the robustness of the nega-
more than that, our portfolio companies to adjust its size. tive scale effect. Diseconomies of scale
employ nearly one million people around In view of these theoretical arguments, were present across subsamples; they sur-
the world making us a major factor in eco- communication costs should be a key de- vived the use of alternative econometric
nomies around the world. If our portfolio terminant of performance. Using the data methods and they were not the result of
holdings and transactions were combined we gathered for individual investments, a simple mechanical effect resulting from
into a single company, [we] would rank as we were able to create a proxy for the firms exiting best-performing investments
the equivalent of number 13 in the For- volume of information communicated in faster. We also showed that survivorship
tune 500.” If a similar calculation were the firm over the life of each investment. bias, differences in risk and reverse causa-
applied to KKR, it would place KKR fifth Specifically, we measured firm scale for lity were unlikely to explain our findings.
in the Fortune 500 ranking, just ahead of each investment as the average number of The third and final element of our work
General Electric. This change in the indus- simultaneously held investments managed was to test some additional predictions of
try raises the question: can large PE firms by the firm over the investment’s life. We diseconomies of scale models and to pro-
deliver sufficient returns? believe this is a good measure because it vide evidence of the potential mechanisms
There is a large body of theoretical lite- captures two key features connecting scale explaining the negative scale effect. We col-
rature on the connection between a firm’s and returns in PE. PE firms are supposed to lected additional data from PE directories,
size and its performance; the emerging monitor, closely and continually, each of PE firm websites, managers’ biographies and
consensus seems to be that “the key trade- the companies in their portfolio. In addi- the PPMs to develop proxies for the orga-
off an organization confronts occurs tion, each investment, regardless of its size, nizational structure of PE firms. These mea-
between communication and knowledge probably requires a similar amount of time sures provided empirical support for the idea
costs.” Garicano (2000, abstract) notes: and communication. So, the number of that hierarchical firms and organizations
“As a firm accumulates activity, it benefits investments under management is a good where the information flow is more difficult,
from an increased utilization of its know- proxy for firm scale. Because we did not face higher marginal communication costs
ledge (i.e., it leverages its know-how), but have a time-series of returns for PE firms, and, thus, display greater diseconomies of
it is penalized by greater communication we related the total performance of each scale. Our data shows that independent PE
needs (i.e., people need to sit in endless investment to the average scale of the firm firms, those with flatter decision structures
meetings trying to find an agreement).” over the life of the investment. and those with professionals of similar back-
Although diseconomies of scale may be Our empirical estimates show that grounds, exhibited less pronounced scale
important for industrial firms, they may firm scale is a robust and consistent diseconomies. We also found that disecono-
not lead to differences in returns across driver of the cross-section of returns mies of scale decreased over the life of the
financial intermediaries such as PE firms. of PE investments. Investments held at firm. This is consistent with investor’s lear-
If agents are rational (e.g., investors are times of a high number of simultaneous ning about the effect. The effect decreases
not limited in the number of funds they investments (SI) underperform substan- regularly and has disappeared beyond the
can monitor), the market for capital is tially. The economic magnitude of the 10th anniversary. This is also consistent with
competitive and there are no other fric- scale effect is large: a one-standard-de- PE firms handling communication better as
tions (e.g., no agency conflicts), then there viation increase in SI decreases IRR by they become more experienced. This means
should be no difference in the returns of- 9%. Investments in the lowest SI decile that the scale of a PE firm beyond its 10th
fered by different firms. If large firms were earn a median IRR (PME) of 36% (1.65), anniversary is not predictive for its future
to offer lower returns, all else being equal, whereas those in the highest SI decile performance.
they would simply receive less capital and earn a median IRR (PME) of 16% (1.08).
would no longer remain large. But most of These results hold in a regression setting
these arguments are unlikely to hold true controlling for other factors that could
in PE. For example, the provision of capital be associated with performance, inclu-
for PE firms is not continuous. Investors ding several investment characteristics,
can only add capital to a PE firm every two PE firm characteristics and fixed effects
to four years, when a new fund is raised. (country, industry, and time).
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 39
II. How are fund size and fund performance related?
Valuation is important to both venture grow their fund size. When a fund becomes We addressed these two questions by
capital (VC) firms and entrepreneurs, and is large, the fixed part of the fee can become looking at a sample of 9,266 financing
therefore a contentious negotiation point. as important as the carry. Since the typi- rounds with valuation data of US VC tran-
For the investors, their return mainly results cal VC fund has seen an increase in capital sactions between 1991 and 2006 provided
from the capital gain between closing and managed per partner as fund sizes grew, we by the VentureXpert database. Table 2 sets
exit. For entrepreneurs, the pre-money raised two simple questions: out our observations, ordered by year.
valuation determines their dilution after 1. Are investment managers still able We postulated that reputable VCs are
the VC’s investment. In our paper “Fund to provide appropriate quantity and likely to pay lower prices. We also assu-
size, limited attention and valuation of quality of services to their investee med that fund size can be related to
venture capital backed firms” (Journal of corporations if they manage a larger reputation. Moreover, larger funds can
Empirical Finance, volume 18, issue 1, Ja- amount of capital? have more negotiation power and, hence,
nuary 2011, pages 2-15), we examined how 2. If there is a decline in the quantity might also pay lower prices. However, if a
characteristics of venture capital funds, in or quality or both of their services, fund grows too big, i.e., beyond its optimal
particular, fund size impact the pricing in (how) does this affect the valuations scale, human capital levels might not keep
the venture capital industry. It is clear that of their investees or the performance up with the capital under management.
the 2/20 rule can be an incentive to VCs to they deliver to their investors? This can dilute the managers’ attention to
40 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
particular transactions. Furthermore, more Table 3: our sample transactions ordered according to their industry
capital under management could result in and to the size of their backers
less rigorous decision-making behavior,
Pre-money valuation [US$m]
and higher entry valuations. In addition,
Mean Median Observations
diluted attention might reduce the VC’s
Industry
value-adding capacity. Either way, less
Computer related 42.2 18.7 4032
time spent monitoring the portfolio can
Communication 68.4 25.9 1771
lead to lower returns to investors.
To address these questions, we first grou- Medical/health/life sciences 30.8 18.2 1395
ped the transactions from Table 2 according Biotechnology 40.0 19.2 790
to the different industries of the investee Semiconductor 46.9 20.5 623
firms, and according to the fund size of their Non-tech 42.3 17.7 655
backers. Table 3 presents this segmentation. VC fund size
Table 3 reveals that the highest valua- Largest quartile 74.1 34.2 2311
tions were achieved in the communication Second quartile 45.4 22.7 2293
technology sector and that larger funds Third quartile 33.1 17.1 2344
were engaged in higher-value transactions. Smallest quartile 30.1 12.8 2318
This is, in principle, no reason for concern,
as large cap funds should focus on large cap
investments. However, it becomes an issue, Our analyses confirmed that reputable human capital levels proportionally to
if the larger general partners (GP) systemati- VCs pay lower prices for ventures of similar the growth in fund size. Limited partners
cally pay higher prices than the smaller ones, quality. We also found a convex (U-shaped) should carefully gauge the development of
or if they are less successful in divesting relationship between fund size and valua- funds that are increasing in size; the value-
their holdings. Therefore, we analyzed via tion. This means that, to a certain extent, adding potential of general partners can
numerous multivariate regressions whether larger funds can receive smaller valuations, decrease with their size, in turn, causing
there was a relationship between pre-money probably because of superior negotiation lower returns to investors.
valuations and a GP’s reputation, its fund power or the benefit of an assumed better
size, measures of attention to the portfolio reputation. However, this trend was reversed
companies, and various characteristics of when the funds operated beyond their opti-
the ventures, such as entrepreneurial firm’s mal level. This effect was even stronger for
size, their stage of development, industry, the less prestigious GPs. We also confirmed
location and VC market conditions, inclu- the theory that limited attention affects va-
ding committed capital and number of IPOs luation. We realized there was a strong link
during the previous year. We rated a VC’s re- between our proxy for capital under mana-
putation by the number of IPOs undertaken gement per partner and the prices the GPs
and used a proxy for the capital managed paid. Finally, we found a concave (inverse U-
per partner of a fund to assess the atten- shaped) relationship between the fund size
tion devoted to the portfolio. Additionally, and the probability for successful exits. That
we verified whether fund size or insufficient means that the probability for a successful
monitoring impacted the performance of exit first increases with the size of the GP,
the ventures. Unfortunately, without having but diminishes again, having surpassed its
performance data for the particular transac- optimal scale.
tions, we had to use a proxy. We differentia- Our findings are important for investors
ted successful from failed deals and used an in venture capital assets. There is a scale
indicator for a trade sale or an IPO exit prior diseconomy, which we believe relates, at
to 2007 for all financing rounds before 2003 least in part, to human capital constraints.
to asses a GP’s portfolio performance. General partners do often not increase
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 41
III. An insight into
different VC
and PE markets
42 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 43
III. An insight into different VC and PE markets
2010 — a year of consolidation and In the Eurozone, as in the global VCPE Taking stock: Eurozone’s strengths
timid recovery in PE and VC activity market, the levels of activity have remai- and weaknesses for VCPE investment
Global private equity (PE) and venture ca- ned well below the pre-crisis peaks, re- VCPE investment is influenced by a range
pital (VC) — VCPE — investment is recove- minding us that the road to full recovery of factors that can be grouped into six
ring from the significant falls experienced will be long and possibly bumpy. The re- categories, which we analyze more closely
during the crisis. In the Eurozone, 2010 was covery is also likely to take the VCPE sec- in this report: economic activity; entre-
a year of consolidation and the start of a tor into new territory. First, risk appetite preneurial culture; depth of a capital mar-
timid recovery for VCPE. With the worst is unlikely to return to pre-crisis levels. ket; taxation; investor protection and cor-
of the global crisis behind us and inves- This will have an ongoing impact on the porate governance; and the human and
tors’ risk appetites returning, PE activity availability of external finance. Second, social environment.
increased significantly and exit numbers VCPE houses will have to operate in a The tendency for Eurozone VCPE acti-
improved strongly, up from 227 in 2009 different legislative and regulatory envi- vity to lag other countries and regions is
to 268 in 2010.6 In particular, there was ronment, with increased reporting and partly the result of deficiencies in a num-
an increase in the number of large IPOs of capital obligations. Finally, VCPE houses ber of these areas. Over the past decade,
more than US$500m in value, although the are changing the way they operate: ex- and even well before the 2010 Eurozone
overall number of listings remained low. perience has shown that value creation sovereign crisis, economic activity has ty-
Nevertheless, the improved availability of is best achieved within long-term and pically risen more slowly in the Eurozone
financing helped kick-start the recovery, as close commitments. For the investors, than in the US or Scandinavia. In the 10
debt markets came back to life. this means putting more of their own years to 2007, Eurozone GDP growth ave-
money, knowledge and expertise into the raged 2.3% per year compared with 3% in
6. Has private equity come out of the slump? Sachin Date, investee company. the US.7 Moreover, a wealth of indicators
Ernst & Young, January 2011 While this consolidation was ongoing, and anecdotes support the view that it is
a two-speed recovery was under way. more difficult to start a business in the
Guest contribution by: Today, the Eurozone presents itself as Eurozone than in many other advanced
increasingly heterogeneous with a robust economies. The World Bank ranks Ger-
Julie Teigland
economic rebound in the core economies many 88th in the world in terms of ease
Leader of Strategic Growth Markets
(Germany, France, Netherlands, Belgium, of starting a business, with the top ranks
- Europe, Middle East, India and Africa
Austria and Finland), and weak perfor- dominated by nimble Asian countries.8 As
Ernst & Young
mance in the periphery (Greece, Ireland, venture capital targets young companies
julie.teigland@de.ey.com
Portugal and Spain, and to a lesser extent, hurdles to entrepreneurship, including
Italy). This widening gap presents VCPE complicated and lengthy legal require-
houses with a choice of investment op- ments or íssues in obtaining access to
portunities to suit the highest and lowest
risk investment models. 7. Oxford Economics
8. World Bank Doing Business indicators
44 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
finance, severely limit VC opportunities. To ring practices and inflexible working time Overall, the three countries mentioned
continue with the German example, there practices. This also applies to some smaller above provide some of the most favorable
are roughly nine steps required to start member countries such as Slovenia or the environments for VCPE firms to conduct
a company in Germany, compared with new joiner, Estonia. business in. Our survey shows them ran-
around five in the OECD on average, and it king among the top nations in terms of
costs around 5% of the average personal Forgotten strengths innovation, efficiency of business start-up
annual income to set up a business com- The picture of the Eurozone market for and closure regulations.
pared with just 1.5% in the US. VCPE investors is by no means unendingly
Some Eurozone countries also fare bleak. Some of the Eurozone’s shining stars
quite badly in terms of investor protection. have attracted VCPE investors. To name just
For instance, the World Bank’s indicators a few:
highlight examples such as limited direc-
tor liability in France or limited disclosure • The Netherlands provides an investor-
rules and practices in Spain. Factors such friendly environment, with one of the
as these may deter limited partners from best track records for intellectual pro-
investing in Eurozone companies. perty protection and legal rights enfor-
Similarly, the Eurozone lags behind cement.
other leading nations in areas of human • Finland’s labor force is highly skilled
and social environment, such as the qua- and flexible. Finland ranked third in
lity of the education system, with the the 2009 PISA survey of student per-
large Eurozone countries behind Asian formance.
and Scandinavian countries in terms of • German companies are more inno-
basic educational achievements. They also vative than most, with world leaders
lag the US and the UK (and increasingly in a number of industries ranging
Asia) in terms of quality and quantity of from pharmaceuticals to solar panels
academic research. to highly specialized machinery —
Furthermore, VCPE firms sometimes according to the World Bank, Germany
need to restructure the company in which spends 2.6% of GDP on research and
they are investing. To do so, they must development, more than the world
comply with local labor legislation and (2.2%) and EU (2%) average.
practices, which, in turn, are key factors
affecting the industry’s potential. Busi- These examples show what is possible
nesses in the larger Eurozone countries to achieve within a European context and
such as France and Spain often find them- explain why VCPE investors have kept a
selves constrained by rigid hiring and fi- high interest and stakes in the region.
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 45
III. An insight into different VC and PE markets
Will the recovery continue in 2011 or zone economies, which will take years of cost restraints and an overhaul of pro-
will the Eurozone lose out to the US painful adjustment to repair. Significant ductivity-enhancing practices. Secondly,
and Asia? fiscal and structural issues need to be these countries need to find new sources
A number of factors are likely to support addressed and potentially adjusted. For of growth. For Ireland and Spain, this
a further recovery in VCPE activity in the example, fiscal adjustment involves large is partially due to the collapse of the
Eurozone this year. First, economic acti- spending cuts, wage freezes or wage cuts construction and its unlikely return to
vity, and thereby prospects for returns on for public sector employees and some tax pre-crisis levels in the near term. For the
investments, should continue to improve increases mainly in the form of higher other countries, it is means discovering
in the core Eurozone countries. These VAT rates. In the Ernst & Young Euro- and exploring areas of expertise that
countries experienced robust growth in zone Forecast we estimate that, for the generate significant export revenues. In
2010, with the main engine of recovery Eurozone as a whole, fiscal restructuring all cases, these changes imply a radical
gradually shifting from exports to domes- will amount to around 1% of GDP for rethink of the way that businesses are
tic activity and, in particular, fixed assets the next few years, a sharp reversal from organized, the sectors that they ope-
investment. While the core Eurozone faces the large stimulus packages put together rate in and of the education and trai-
its own challenges, with large budget during the global crisis. ning of the workforce that is required.
deficits and an aging population, these These processes will be disruptive. They
issues are surmountable and this group The Eurozone needs to restructure its may create some opportunities for VCPE
of countries should be able to achieve economy to remain competitive firms, but distinguishing the promising
robust, if unremarkable, growth. This pro- In terms of structural issues, a number targets from the others in the transition
vides a relatively secure environment for of countries in the periphery need to process will be difficult.
VCPE firms to operate in. reshape their economies in two ways. The restructuring needed in the peri-
Second, we estimate that there is a First, these countries (excepting Ireland) phery implies that there will be a much
staggering US$138b of “dry powder” ca- need to tackle their competitiveness weaker performance than in the core Eu-
pital held by European PE firms seeking (or lack therof). This includes wage and rozone. In the next five years, we expect
investment opportunities before their
investment periods expire.9
However, there are also significant Exhibit 10: Eurozone divergence
challenges; the Eurozone is competing 2008=100
with other potential locations for PE 110
investment. As that growth is likely to
be significantly lower in the Eurozone
105
than in other regions, many PE houses
may prefer to focus on other parts of the
world. The Ernst & Young Eurozone Fore- 100
cast expects annual average GDP growth
Periphery
of only 1.8% per year over the next five
years in the Eurozone, about half as much 95
46 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
the periphery to grow by only around Exhibit 11: loans to non-financial corporations
1.3% per year compared with 2.1% for
% year
the core Eurozone.10 This is a significant
40
change from the years before the crisis Ireland
when the periphery consistently out- 30
performed the core Eurozone. This may Spain
imply a change of focus for VCPE houses. 20
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 47
III. An insight into different VC and PE markets
Opportunity for bargain deals in Exhibit 12: European banks claims on "peripherals"
Europe? US$ billion
The depressed economic environment in 800
the Eurozone’s periphery may, however,
700
present attractive valuations for some
deals. A number of emerging markets have 600
expressed interest in making medium- to
500
long-term investments in Portugal and
Spain, for instance. But we think that the 400
crucial issue in balancing risks and poten-
300
tial rewards is the solidity of the PE inves-
tors’ financial backing. 200
Investing in the periphery presents si-
100
gnificant risk and the prospect of several
years of low or negative returns. The risk 0
Greece Portugal Spain Ireland
of sovereign debt restructuring by one pe-
Sources: Oxford Economics/Haver analytics
ripheral country still remains significant. If
it happens, it seems unlikely that restruc-
turing will proceed in an orderly fashion. neous area; Ireland is grouped with other What can policymakers and
It may send shock waves through financial countries in the south due to its fiscal and lawmakers do to foster VCPE activity?
markets of the restructuring country and banking woes, but the fundamentals of Research indicates that VCPE activity has
other peripherals, as well as those of the the Irish economy are significantly stron- significant positive impacts on the eco-
core Eurozone. The contagion could be ger than those of Greece or Portugal, with nomy as a whole. For instance, studies by
significant as European banks (and mainly a large and still thriving high-tech sector the World Economic Forum found that,
German and French banks) own more than that should present attractive opportuni- in the years after VCPE transactions, pro-
US$1.5b of debt from Greece, Ireland, ties for VCPE. This is why, in the medium ductivity growth is higher in target firms
Portugal and Spain.12 Debt restructu- term, we are much more optimistic about than in similar companies. This suggests
ring could undermine the banks’ balance Ireland than we are about the other pe- that policymakers should seriously consi-
sheets in the core of the Eurozone, with ripheral countries. We believe that the der fostering the development of VCPE by
repercussions for economic activity in Irish economy has the ability to return to strengthening corporate governance and
these countries too. Such a shock may growth rates of around 3.5% in the second investor protection, and by avoiding exces-
also send the euro exchange rate spiraling half of this decade, compared with pro- sive taxation and regulation. So while much
downward, impling a significant currency bably only 1.5%-2% for Greece, Portugal of the policy debate focuses on tightening
risk to investors. and Spain. the regulation of the sector, this needs to be
It is worth commenting that the Euro- As a result, only those investors that are implemented alongside measures that help
zone periphery is actually a heteroge- able to survive a protracted rough patch catalyze the positive spillovers of VCPE on
should consider such opportunities in the the rest of the economy. As mentioned, ac-
12. Bank of International Settlements
periphery. cess to funds is one of the main weaknesses
48 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
in VCPE development in the Eurozone. This recipients of VCPE investments. In this res-
can be enhanced within the framework of pect, scale is a significant issue. This calls
new regulatory rules, for instance, by gran- for the deeper integration of the European
ting tax concessions to investments in high- VC industry promoted by pan-European
tech sectors or by setting up public co-in- regulation and legislation.
vestment of high-tech focused funds. The
European Investment Bank (EIB) is already Adapting to a challenging and
active in the VC market and has provided changing environment
financial support to a number of projects. Overall, the unfolding economic recovery
However, the EIB lent €79b in 2009, which should provide a more favorable back-
represents only 0.7% of the EU’s GDP.13 This ground for VCPE firms in the Eurozone.
type of action may need to be increased to Estonia’s entry to the Eurozone on 1 Ja-
keep Europe’s place in the global economy. nuary 2011 is a testimony to the region’s
The potential negative impact on attractiveness and the benefits that are
growth of Eurozone fiscal restructuring in still to be gained from the institutional
the years ahead will make it even more im- setup. Nonetheless, the Eurozone also
portant for governments to foster activity presents a number of challenges, inclu-
in the private sector. Indeed, cash-strapped ding limited access to finance, relatively
government departments will not be able rigid labor markets, and opaque corpo-
to sustain, let alone increase, funding of rate governance. The outlook is further
research and innovation. As the emerging clouded by uncertainties around the risk
markets move up the value chain, it will of debt restructuring in some Eurozone
be increasingly important for advanced countries that would send shockwaves
economies to keep a technological edge. through financial markets and lead to a
VCPE offers a channel to fund research and significant depreciation of the euro ex-
innovation privately. Indeed, VC is key to change rate. At a time when governments
funding young and entrepreneurial com- are focusing on spending cuts, and bud-
panies, those that drive innovation, therby gets for public-funded research are pared
vital to the Eurozone’s future. Finally, it back, growing the Eurozone VCPE industry
would pay to ensure rapid growth in some that can finance innovation and help new
nascent sectors that would involve a first companies reach a critical size should be
mover advantage. High-tech, biotech and a very attractive option. For this to hap-
green technology are all areas in which the pen though, the policy rhetoric needs to
Eurozone could gain significantly from lea- move from a focus on tighter regulation
ding other countries and regions. They are to intelligent regulation that promotes
also capital-intensive sectors that are ideal VCPE firms that are committed to deliver
value to their investors and the economies
13. European Investment Bank
they operate in.
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 49
III. An insight into different VC and PE markets
The 2011 Global VC/PE Country As economic output grows, increasing Economic growth in North Africa has
Attractiveness Index sees African countries amounts of development capital will be also been forecast to be strongly positive
moving up the rankings, increasing their required, both for infrastructure and for in 2011, although political unrest may
position relative to counterparts in Latin corporate investment. Africa’s growing yet have an effect on IMF forecasts that
America and Central and Eastern Europe. middle classes are providing a particular are mainly in the 4%-5% band, including
Better economic forecasts are central to stimulus to industries such as consumer 5.5% in regional powerhouse Egypt.
this improvement, just as they are to the goods, telecoms, financial services and Nonetheless, there is much more to VC/PE
overall level of VC/PE activity in Africa. pharmaceuticals, leading to a growing activity in Africa than economic growth
Output growth in Sub-Saharan Africa is need for investment capital. Government prospects in a handful of countries and
projected to accelerate to 5.5% in 2011 by finance, bank borrowing and the financial industries. In the rest of this article, we
the International Monetary Fund (IMF),14 markets are all potential funding sources. explore some of the features of VC/PE
with GDP forecast to grow by more than Even so, there will always be some gaps investment in Africa from three different
7% in oil exporters Nigeria and Angola, at between what governments can afford to perspectives.
nearly 6% in Kenya and at a steadier 3.5% fund and what banks or other investors
in regional hub South Africa. Natural re- are willing to lend, and it is here that VC/
sources are a key driver of expansion, but PE investors often find interesting invest-
economic reform, increasing cross-border ment opportunities, whether in private
trade and expansionary public spending sector companies or though public pri-
are also significant factors. vate partnerships.
50 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Critical success factors when conducting VC/PE deals in Africa
The full scope of VC/PE activity in Africa potential for growth in renewable energy local knowledge and contacts as a means
spans a large range of countries, indus- such as hydroelectric and solar power. to identify and assess potential invest-
tries and investments, so it follows that African investment opportunities ment opportunities. “Identifying and re-
the way deals are identified, assessed, tend to have uniquely African features. taining high-quality management teams
funded and executed also varies widely. One is the way that new technology with the skills to evolve what are often
Investment professionals who specialize in can open up new possibilities by leap- family-run businesses into something
VC/PE transactions are well placed to spot frogging historic problems. Information more is critical too,” he adds.
patterns as they emerge. technology and communication techno- Mr. Stokoe also highlights the impor-
One such pattern is geographic. The logy in particular have the scope to help tance of understanding political sen-
well-established hubs of VC/PE activity other industries achieve dramatic leaps sitivities, “particularly when it comes
are South Africa and Nigeria, often used forward, typified by the rapid develop- to assets involving natural resources or
as stepping stones into other regional ment of mobile phone-based banking in opportunities involving government led
markets. In addition to countries such Kenya. A similar area of potential fusion infrastructure projects.” Again, to po-
as Namibia and Kenya covered by the receiving growing attention – again with tentially reduce these risks, Mr. Stokoe
2011 Index, Victor Kgomoeswana of obvious social benefits – is telemedicine and Mr. Kgomoeswana both stress the
Ernst & Young’s Africa Business Center and e-health. importance of building personal rela-
identifies Angola, Ghana, Tanzania and Tax is another area where African PE tionships and local knowledge. Above
the Democratic Republic of Congo as investments often differ from those in all, they emphasize the need for patience
countries with emerging appeal for PE developed markets. Craig Miller, Ernst & and an open, transparent approach that
investors. Mr. Kgomoeswana also points Young’s Transaction Tax leader for Africa addresses the potential concerns of all
to the growing role of regionalization. points to three particular features. “One stakeholders. Investors prepared to take
Kenya, Tanzania, Uganda, Rwanda and is that the finance cost of acquiring a pains with their approach are likely to
Burundi now form a common market in company’s shares is rarely tax deductible,” find a range of potentially attractive in-
East Africa, helping to generate larger he explains. “This reflects a desire for an vestments waiting to be made.
investment opportunities and encoura- even-handed approach, given that do-
ging companies to expand their geogra- mestic dividends are usually untaxed.” The
phic footprint. second feature is the challenge of extrac-
Patterns can also be seen when it comes ting profit across borders, owing to the
to the industries attracting VC/PE invest- withholding taxes applied by many Afri-
ment. Again, Mr. Kgomoeswana identifies can countries to dividends, interest, royal-
some common themes. “With many Afri- ties and fees paid to foreign investors. The
can countries coming from a low physical third feature is that PE investments may
and economic infrastructure base; roads, be liable to capital gains tax on disposal,
telecoms, power generation and finan- although Mr. Miller points out that with
cial services are all attractive industries; careful planning, the effect of CGT arising
along with secondary sectors such as upon exit may be reduced.
construction,” he says. “Growing consu- There are, of course, many factors for
mer spending power is giving the retail VC and PE firms to consider when wei-
and consumer products industries a boost ghing possible investments in Africa. Gra-
too.” In addition to the obvious appeal of ham Stokoe of Ernst & Young’s Transac-
hydrocarbons and other natural resources, tion Advisory Services practice for Africa
Mr. Kgomoeswana also points to African points to the importance of developing
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 51
III. An insight into different VC and PE markets
Just as in other markets, an African PE sing construction and growing consumer Asian demand for natural resources gives
fund managed by a company looking spending can also be felt in sectors such many African mining and resources com-
for buyout opportunities or the chance as cement, power generation, consumer panies exceptionally good growth pro-
to supply an established company with goods and agribusiness. files,” says Mr. Horton. He cites the fact
growth capital will typically be looking Second on the list of investment the- that African companies are increasingly
to invest in companies that have already mes is regional expansion. The PAIP funds building cross-border business under
achieved success but have the potential have a history of investing in local Afri- their own steam as further evidence of
to step up in scale. The size of invest- can businesses with the potential to grow the potential for growth.
ment a fund seeks to make will vary into multi-country enterprises. Regio- If the potential attractions of private
depending on its size and reach, whether nally expanding businesses are central equity investment in Africa are so com-
local, national, regional or pan-African. to KZAM’s investment strategy because pelling, what about the supposed diffi-
At the larger end of the scale, funds will they benefit from the diversification culties – such as political interference?
typically be seeking to invest in compa- of currency and country-specific risks, Mr. Horton does not dismiss the role that
nies with the potential to achieve regio- attract more experienced management political factors can play in African tran-
nal dominance. and offer improved exit options. Business sactions, but stresses that most problems
One such group of funds are the Pan- expansion is also the key to sustainable can be overcome with a sensitive, intel-
African Investment Partners funds (PAIP regional economic development and in- ligent and restrained approach. He gives
I and II) managed by Kingdom Zephyr tegration, something KZAM has a history the example of one opportunity “that on
Africa Management (KZAM). KZAM is of championing, the face of it was an obvious take pri-
owned by New York investment house The third KZAM investment theme is vate, exit public investment.” However
Zephyr Management, L.P. and Kingdom partnering with portfolio companies to it was decided that maintaining a local
Holding Company, the investment hol- achieve the company’s long-tem per- listing would help to maintain local sup-
ding vehicle controlled by HRH Prince formance goals. KZAM works closely port without overturning the economics
Alwaleed Bin Talal Bin Abdulaziz Alsaud with investee companies, providing the of the transaction. In the end that par-
of Saudi Arabia. As a firm, KZAM typically assistance necessary to strengthen ope- ticular deal did not take place, but it
looks for opportunities in the US$30m- rations, advance business strategy and illustrated an approach that Mr Horton
US$75m bracket, with a focus on three enhance governance, ultimately propel- feels can generate long-term goodwill
investment themes. ling the company and the investment to without eroding rates of return.
“First, we are interested in opportuni- success.
ties that address the needs of the rapidly Recently, KZAM has been seeing po-
growing African middle class,” says Jo- tential growth opportunities come out of
hannesburg-based partner Robert Horton. transformation – something which tends
KZAM is certainly not alone in identifying to be more specific to a particular mar-
the high percentage of many countries’ ket – and connections with other emer-
populations that are younger than 30 – in ging markets. Transformational programs
many cases, with far better levels of edu- such as black economic empowerment in
cation than those of their parents – as a South Africa and oil and gas indigeniza-
growth opportunity. “We look in particu- tion in Nigeria can lead to a shake-up in
lar for industries with direct exposure to ownership and a chance for fresh capital
the aspirations of this group,” explains and external expertise in strategy or go-
Mr. Horton, citing the telecoms, financial vernance to be put to work. On the sub-
services, and affordable housing sectors ject of connections with other emerging
as examples. The knock-on effect of hou- markets, “It goes without saying that
52 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
An African perspective on venture capital
Within the VC/PE universe, VC in Africa is At the same time, the study identified ment and multilateral funds are generally
defined much as it is elsewhere – equity some weaknesses. One key area identified predominant, and corporate venturing is
funding of technology-driven businesses by almost all surveyed firms as needing often more common than independently
that are aiming for rapid growth in inter- improvement is South Africa’s exchange managed VC investment. Weak levels of
national markets. At the same time, VC in controls. These can restrict the outward investor protection can be a limitation on
Africa has some features all its own. movement of expertise and capital, VC activity in some countries, but as in the
For now, South Africa represents Afri- and were cited by some as a reason for wider African PE market, local knowledge
ca’s most developed VC market. A recent having lost transactions to internatio- and local contacts are crucial to mitiga-
survey15 of 33 South African VC funds nal VC funds. At a time in the economic ting many potential risks. Another peren-
commissioned by The Southern African cycle when many funds are looking to exit nial problem – which is also not restricted
Venture Capital and Private Equity Asso- investments, SAVCA also sees a need for to the VC asset class – is finding good-
ciation (SAVCA) showed that at least public sector funds to step in and fill the quality management teams.
R2.6b was invested in VC assets between resulting hiatus in the provision of early Nonetheless, there are African VC
2000 and July 2010, although the true to- stage capital. The role of the government- funds looking for fast-scaling invest-
tal could well be higher. The study found backed Technology Innovation Agency, ments across the region. Adlevo Capital,
several indications of the VC industry’s which has taken longer than anticipated based in Mauritius (there fund is in Mau-
sophistication in South Africa. One was to get up and running, is expected to be ritius but they have offices in Johannes-
the range of VC fund types, which include crucial in this area. “As well as the good burg and Lagos – see www.adlevocapital.
independents, single-sponsored funds, go- news, it is also clear that a lot needs to be com, is one example of an independent VC
vernment funds, family offices and corpo- done by public and private stakeholders to firm seeking technology-driven invest-
rate venturing. The dominance of private encourage and strengthen the VC indus- ments that can offer attractive returns
sector VC investments during the decade try,” says Mr. Fourie. and achieve social development goals in
and the spread of industries targeted for In comparison with South Africa, the Sub-Saharan Africa. These goals reflect a
investment were other positive indicators. VC industry in many African nations is sense that, at its best, VC activity can play
As J-P Fourie, Executive Officer of SAVCA still in the early stages of development. a valuable role in stimulating grass-roots
puts it: “The report provides real evidence As an asset class, VC in Africa tends to economic development in Africa, as well
that VC is an active, albeit emerging sector be less accessible than conventional SME as representing an attractive investment
in South Africa.” finance or later stage PE finance. Govern- class in its own right.
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 53
IV. Regional and
country profiles
54 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 55
IV. Regional and country profiles
The first page of the performance overview shows basic facts, a SWOT-analysis, the country’s
key driver ranks, the ranks according to the separate VC and PE Indices, as well as a comparison
within the regional peer group.
1 Basic Facts and Opportunities and Challenges 3 Separate VC and PE indices and comparison within
“Basic Facts” comprises main indicators such as GDP, population, peer group
and their growth rates, and the country’s position with respect The chart left shows the country’s ranking position for the com-
to its IPO, M&A, VC and PE market activity expressed in quartiles bined VCPE and for the separate VC and PE country attractiveness
of the sample of countries. The section “Opportunities and Chal- indices over time. On the right, we present the country relative
lenges” provides the reader with a SWOT analysis regarding the to its peers. The peer group is determined by nine countries of
country’s VCPE investment conditions. These analyses are provi- the same region. If we cover less than nine countries from a par-
ded by local teams from Ernst & Young. ticular region we add countries from other regions to the peer
group. The set of peers is not always the same. It is the selection
2 VCPE-Ranking and Key Factor Performance of eight other countries in alphabetical order, plus the country
The “VCPE-Ranking” table exhibits the index values and the ran- in question.
king positions of the country for the overall index, and for each
key driver separately, for the 2007 through to 2011. Next to the 4 The Global Venture Capital and Private Equity
current rank, the change of a ranking position is indicated by Country Attractiveness Index in detail
green arrows for an increase in rank, red arrows for a decrease The second page of information for the individual countries pre-
and yellow arrows indicate no movement. The quartiles indicate sents the ranks achieved for each of the level-2 constructs. Once
the country’s position among all the countries in the sample. The again, the arrows mark ranking changes, and the crosses indicate
spider chart on the right shows the performance of each key dri- the country’s position measured in quartiles, with respect to all
ver compared to the average of the region where the country is other countries from the sample.
located.
We note that the overall VCPE ranking is not the average rank
from all the key drivers. First, the key drivers have different weights,
and second, the ranking is always the result of a benchmark pro-
cess: the rank of a country also depends on the ranks of the key
drivers of the other sample countries. A simple example helps to
explain this issue and why countries can improve or deteriorate
their ranking without respective improvements or deteriorations
of their key drivers: imagine there are four countries to benchmark
with the following key driver ranks (and assumed equal weights of
all key drivers for this example):
Country
Key drivers/ranks
A B C D
Economic activity 2 1 3 4
Depth of a capital market 2 1 3 4
Taxation 2 3 1 4
Investor protection and corporate governance 2 3 1 4
Human and social environment 2 3 4 1
Entrepreneurial culture and opportunities 2 3 4 1
Overall rank 1 2 3 4
Even if country A ranks on the second position with all the key
driver scores its final rank is number one.
56 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
IV. Regional and country profiles
Africa
Basic Facts VCPE-Ranking Details
1 2007 2011
Rank Value Rank
Quartile
4th 1st
2 4 1 Economic Activity
1. Economic Activity
2007 2011 Quartile
VCPE Ranking 7 47,3 6 Rank Value Rank 4th 1st
Depth of Capital Market 6 35,1 6 1.2 Medium-Term Real GDP Growth 4 136,7 1
next 10 years, continues to slow down trade with high costs of imports 3.1 Tax Incentives and Administrative Burdens 6 92,6 6
Africa World
and exports Investor
s Shortage of skills, aggravated by the effects of migration as well as the Protection and
Corporate hŶŝƚĞĚ^ƚĂƚĞƐ сϭϬϬWŽŝŶƚƐ
requirement by some African countries to hire locals 44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
s Corruption still threatens service delivery and sociopolitical stability 2007 2011 Quartile
Separate VC and PE Indices Rank Value Rank 4th 1st
Opportunities 4.1 Corporate Governance 7 65,3 5
s Growth in internet penetration places Africa on the information 5
s Mineral and other resources are still being discovered in areas previously
not considered. For example, Angola and Ghana are the new oil giants and 55.Human
Human and
and Social Environment
Social Environment
Tanzania is a growing gold producer 2007 2011 Quartile
7 Rank Value Rank 4th 1st
Threats 7 45,4 7
5.1 Education and Human Capital
s Political risk
s Growing trend toward resource nationalism and local ownership could 5.2 Labor Market Rigidities 5 65,2 5
8
dampen investors’ appetite 5.3 Bribing and Corruption 8 35,9 8
2006 2007 2008 2009 2010 2011
s Governments' intervention in corporate or M&A activity
Outlook VC PE VCPE
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
s The African economy looks set to achieve sustained growth by a rate
2007 2011 Quartile
above the global average Comparison within Peer Group Rank Value Rank 4th 1st
s Africa’s large middle class and working population should drive growth in 2007 2011 Quartile
6.1 Innovation 7 24,8 7
consumer products and improve the region’s economic prospects by 2050 Rank Value Rank 4th 1st
s Any disruption to the global economic recovery could mean a slower North America 1 97,4 1 6.2 Scientific and Technical Journal Articles 6 46,3 6
economic recovery for Africa 6.3 Ease of Starting and Running a Business 6 77,1 6
Australasia 2 83,8 2
Victor Kgomoeswana, Ernst & Young 6.4 Simplicity of Closing a Business 5 65,3 5
Western Europe 3 78,5 3
victor.kgomoeswana@za.ey.com
Asia 4 65,4 4 6.5 Corporate R&D 8 17,7 8
58 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 59
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 57
IV. Regional and country profiles
Africa
Basic Facts VCPE-Ranking
2007 2011 Quartile
Rank Value Rank 4th 1st
VCPE Ranking 7 47,3 6
Economic Activity 6 77,2 7
Depth of Capital Market 6 35,1 6
Taxation 6 92,6 6
Inv. Prot./Corp. Gov. 6 61,5 6
Human/Social Env. 7 47,4 7
Entrepr. Cult./Deal Opp. 7 40,0 8
Quartile
4th 1st
GDP 1082 [bn USD] IPO Volume
Population 408 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity Economic
Activity
100
75
SWOT Analysis Entrepr. Culture
Depth of Capital
and Deal 50 Market
Opportunities
Strengths 25
• With a population of one billion and a growing middle class and urban
0
population, Africa is poised for long-term economic growth
• Abundant solar energy, hydro-electric potential and geothermal capacity
Human and
Weaknesses Social Taxation
Environment
• Infrastructure, which requires annual investments over US$10b for the
next 10 years, continues to slow down trade with high costs of imports Africa World
and exports Investor
• Shortage of skills, aggravated by the effects of migration as well as the Protection and
Corporate United States = 100 Points
requirement by some African countries to hire locals
• Corruption still threatens service delivery and sociopolitical stability
Separate VC and PE Indices
Opportunities
5
• Growth in internet penetration places Africa on the information
superhighway
• Exponential growth in mobile communications (over 50% in under 10
years) has halved the cost of digital communication 6
Index Rank
• Mineral and other resources are still being discovered in areas previously
not considered. For example, Angola and Ghana are the new oil giants and
Tanzania is a growing gold producer
7
Threats
• Political risk
• Growing trend toward resource nationalism and local ownership could
8
dampen investors’ appetite
2006 2007 2008 2009 2010 2011
• Governments' intervention in corporate or M&A activity
Outlook VC PE VCPE
58 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 59
IV. Regional and country profiles
Asia
Basic Facts VCPE-Ranking
2007 2011 Quartile
Rank Value Rank 4th 1st
VCPE Ranking 4 65,4 4
Economic Activity 1 93,0 2
Depth of Capital Market 4 58,6 4
Taxation 4 95,2 5
Inv. Prot./Corp. Gov. 5 69,6 5
Human/Social Env. 5 60,6 5
Entrepr. Cult./Deal Opp. 4 57,8 4
Quartile
4th 1st
GDP 17049 [bn USD] IPO Volume
Population 3406 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity Economic
Activity
100
75
SWOT Analysis Entrepr. Culture
Depth of Capital
and Deal 50 Market
Opportunities
Strengths 25
• Fastest-growing region of the world economy for many years – set to
0
continue, largely driven by China and India
• Strong position in many manufacturing sectors – in some the result of
Human and
leading technologies, in others the advantage of comparatively lower Social Taxation
labor costs than other regions Environment
Opportunities
• Debt headwinds in the US and EU may encourage Asian markets to Separate VC and PE Indices
rebalance their economies and promote domestic demand; this could
0
stimulate strong growth in the service sectors if accompanied by
structural reform and liberalization
• Rapid increase in the number of urban middle-class consumers 1
Threats 3
• Political tension in some markets could lead to potential for conflict if
unresolved
4
• Asia needs to look at further improving corporate and administrative
governance in general, and avoid arbitrary regulatory and business
5
decisions that may discourage foreign investment
2006 2007 2008 2009 2010 2011
• Infrastructure challenges could hinder expansion in potentially fast-
growing economies VC PE VCPE
Outlook
• Asia has a positive economic outlook, but much of this is already factored Comparison within Peer Group
into asset valuations, with a number of equity markets at or above their 2007 2011 Quartile
pre-crisis peaks after major foreign buying during 2010 Rank Value Rank 4th 1st
• The banking sector is in relatively good shape; non-performing loan ratios North America 1 97,4 1
are significantly lower than a few years ago
• Both China and India are looking to dampen credit growth in 2011 as part Australasia 2 83,8 2
of efforts to contain inflation Western Europe 3 78,5 3
• Concerns about excessive capital inflows have led to an increase in capital Asia 4 65,4 4
control measures
Middle East 5 62,9 5
Bill Delves, Ernst & Young Africa 7 47,3 6
bill.delves@au.ey.com
Eastern Europe 6 44,4 7
Latin America 8 44,0 8
60 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 61
IV. Regional and country profiles
Australasia
Basic Facts VCPE-Ranking
2007 2011 Quartile
Rank Value Rank 4th 1st
VCPE Ranking 2 83,8 2
Economic Activity 7 91,1 3
Depth of Capital Market 3 64,5 3
Taxation 2 107,5 2
Inv. Prot./Corp. Gov. 1 110,1 1
Human/Social Env. 1 108,7 1
Entrepr. Cult./Deal Opp. 3 79,5 3
Quartile
4th 1st
GDP 1321 [bn USD] IPO Volume
Population 26 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity Economic
Activity
125
100
SWOT Analysis Entrepr. Culture
75 Depth of Capital
and Deal
50
Market
Opportunities
Strengths
25
• Strong innovation and R&D capacity
0
• Democratic and stable political, regulatory and legal environment
• Strong economy supported by sound banking and capital market regimes
Human and
Weaknesses Social Taxation
Environment
• Low tax incentives
Australasia
• VCPE performances patchy
Investor World
Opportunities Protection and
• Strong stock market culture Corporate United States = 100 Points
• There will be pressure from limited partners (LPs) to exit investee companies
• The region will have high interest rate environments and generally strong
currencies
2
• Financing and acquisition opportunities are expected to increase
• Strong economies will support corporate profitability and generate good
short-term growth prospects
3
Bryan Zekulich, Ernst & Young
2006 2007 2008 2009 2010 2011
bryan.zekulich@au.ey.com
VC PE VCPE
62 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 63
IV. Regional and country profiles
Eastern Europe
Basic Facts VCPE-Ranking
2007 2011 Quartile
Rank Value Rank 4th 1st
VCPE Ranking 6 44,4 7
Economic Activity 5 64,7 8
Depth of Capital Market 8 26,4 8
Taxation 5 95,4 4
Inv. Prot./Corp. Gov. 7 60,3 7
Human/Social Env. 6 55,0 6
Entrepr. Cult./Deal Opp. 6 46,0 6
Quartile
4th 1st
GDP 2216 [bn USD] IPO Volume
Population 241 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity Economic
Activity
100
75
SWOT Analysis Entrepr. Culture
Depth of Capital
and Deal 50 Market
Opportunities
Strengths 25
• Generous tax incentives among most of the Eastern European countries
0
• Strong stock market in Poland
Weaknesses Human and
• Generally weak capital market structure in the region Social Taxation
Environment
• Lack of experience in structuring and completing complex transactions
Eastern Europe
• Currency volatility in some countries
Investor World
Opportunities Protection and
• Rising entrepreneurial culture and opportunities for VC investors Corporate United States = 100 Points
4
Outlook
5
• The regime of tax incentives is expected to continue
6
• Experience in leverage transactions will increase across the region
7
Margaret Dezse, Ernst & Young 8
margaret.dezse@hu.ey.com
9
2006 2007 2008 2009 2010 2011
VC PE VCPE
64 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 65
IV. Regional and country profiles
Latin America
Basic Facts VCPE-Ranking
2007 2011 Quartile
Rank Value Rank 4th 1st
VCPE Ranking 8 44,0 8
Economic Activity 4 83,1 4
Depth of Capital Market 7 32,6 7
Taxation 8 90,5 8
Inv. Prot./Corp. Gov. 8 44,8 8
Human/Social Env. 8 42,1 8
Entrepr. Cult./Deal Opp. 8 40,1 7
Quartile
4th 1st
GDP 4281 [bn USD] IPO Volume
Population 491 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity Economic
Activity
100
75
SWOT Analysis Entrepr. Culture
Depth of Capital
and Deal 50 Market
Opportunities
Strengths 25
• Latin America has proved to be more robust after the last global crisis and
0
its economic performance is currently at an all-time high
• Improvement of capital markets development compared with previous
Human and
periods Social Taxation
• Increase in the region’s GDP, private consumption and investment Environment
• Strong tax incentives contributing comprehensively to the region’s Latin America
appreciation
Investor World
Weaknesses Protection and
Corporate United States = 100 Points
• Despite the positive growth rates, high historical volatility
• Lack of entrepreneurial culture delaying the development of new companies
• Poor application of the appropriate regulations and laws in several countries Separate VC and PE Indices
• Imperfection on credit markets 6
• Disparity in growth across the region
• Accelerated inflation in 2010 exceeded projections due to a stronger than
expected recovery
7
• Nominal and real appreciations in most currencies during 2010
Index Rank
Opportunities
• Public effort to promote start-ups and innovation
8
Threats
• High perception of corruption and weak judicial system in many countries
• Investor protection and corporate governance structures are still
9
underdeveloped in comparison with developed countries
2006 2007 2008 2009 2010 2011
• Most countries managed to escape the impact of higher commodity prices
through currency appreciation VC PE VCPE
• Presidential elections and newly elected governments might increase the
uncertainty related to policy-making
Comparison within Peer Group
• External shocks are likely to have a negative impact through both trade
and financial channels 2007 2011 Quartile
Rank Value Rank 4th 1st
Outlook North America 1 97,4 1
• Almost every economy is expected to grow strongly, with only a few
remaining under populist governments Australasia 2 83,8 2
• Inflation projections are expected to be missed (although still one digit Western Europe 3 78,5 3
rates in almost every country) Asia 4 65,4 4
• Lack of basic infrastructure is delaying development, but provides new
Middle East 5 62,9 5
investment opportunities
• VCPE industry is being developed in some countries, while remaining Africa 7 47,3 6
almost non-existent in others Eastern Europe 6 44,4 7
Daniel Serventi, Ernst & Young Latin America 8 44,0 8
daniel.serventi@ar.ey.com
66 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 67
IV. Regional and country profiles
Middle East
Basic Facts VCPE-Ranking
2007 2011 Quartile
Rank Value Rank 4th 1st
VCPE Ranking 5 62,9 5
Economic Activity 3 80,4 5
Depth of Capital Market 5 55,2 5
Taxation 7 92,0 7
Inv. Prot./Corp. Gov. 4 73,8 4
Human/Social Env. 4 70,4 4
Entrepr. Cult./Deal Opp. 5 51,4 5
Quartile
4th 1st
GDP 1112 [bn USD] IPO Volume
Population 52 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity Economic
Activity
100
75
SWOT Analysis Entrepr. Culture
Depth of Capital
and Deal 50 Market
Opportunities
Strengths 25
• Increasing oil prices in 2011 are expected to spur Middle East economic
0
growth
• Retreating inflation
Human and
Weaknesses Social Taxation
Environment
• Weak and underdeveloped financial markets following crisis
Middle East
• Fiscal budget further burdened by the Government’s initiative to provide
nationals with state subsidies and aid Investor World
Protection and
Opportunities Corporate United States = 100 Points
Outlook
• Inflation is expected to remain relatively stable during 2011, while Comparison within Peer Group
unemployment and a lack of structural reforms form the region’s core 2007 2011 Quartile
social issues Rank Value Rank 4th 1st
Phil Gandier, Ernst & Young North America 1 97,4 1
phil.gandier@sa.ey.com Australasia 2 83,8 2
Western Europe 3 78,5 3
Asia 4 65,4 4
Middle East 5 62,9 5
Africa 7 47,3 6
Eastern Europe 6 44,4 7
Latin America 8 44,0 8
68 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 69
IV. Regional and country profiles
North America
Basic Facts VCPE-Ranking
2007 2011 Quartile
Rank Value Rank 4th 1st
VCPE Ranking 1 97,4 1
Economic Activity 2 95,1 1
Depth of Capital Market 1 94,0 1
Taxation 3 104,5 3
Inv. Prot./Corp. Gov. 2 103,1 2
Human/Social Env. 2 104,2 2
Entrepr. Cult./Deal Opp. 1 95,2 1
Quartile
4th 1st
GDP 16358 [bn USD] IPO Volume
Population 343 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity Economic
Activity
125
100
SWOT Analysis Entrepr. Culture
75 Depth of Capital
and Deal
50
Market
Opportunities
Strengths
25
• Better economic recovery compared with other developed markets,
0
particularly Europe
• Recovery of financial markets
Human and
• Strong innovation and entrepreneurship culture Social Taxation
• Fully developed and robust VCPE “ecosystem” Environment
North America
Weaknesses
• Economic recovery not strong enough to show effects on unemployment Investor World
and to drive substantial increase in domestic demand Protection and
Corporate United States = 100 Points
• High individual debt and possible further deleverage of individuals
• Continuous decrease in the number of VC funds
• Decline of VC-backed IPOs Separate VC and PE Indices
0
Opportunities
• Innovation and fast growth can be seen in segments such as cleantech,
cloud computing, social networks, wireless and security
• Worldwide economic rebound and growth of emerging markets is driving
Index Rank
Threats
• Succession planning in some funds
• The lack of exits is impacting the ability to raise new or follow-on funds
• Global competition is accelerating
2
• State deficit is likely to lead to increase in taxation and will continue to 2006 2007 2008 2009 2010 2011
weaken the US dollar, thus adding foreign exchange risk
Outlook VC PE VCPE
70 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 71
IV. Regional and country profiles
Western Europe
Basic Facts VCPE-Ranking
2007 2011 Quartile
Rank Value Rank 4th 1st
VCPE Ranking 3 78,5 3
Economic Activity 8 80,2 6
Depth of Capital Market 2 66,5 2
Taxation 1 109,9 1
Inv. Prot./Corp. Gov. 3 90,7 3
Human/Social Env. 3 83,6 3
Entrepr. Cult./Deal Opp. 2 80,7 2
Quartile
4th 1st
GDP 16166 [bn USD] IPO Volume
Population 408 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity Economic
Activity
125
100
SWOT Analysis Entrepr. Culture
75 Depth of Capital
and Deal
50
Market
Opportunities
Strengths
25
• Deep financial markets
0
• The importance of VCPE, as an asset class, is recognized in the investment
landscape
Human and
• PE acquisition activity has rebounded and exit opportunities have Social Taxation
reappeared in M&A markets. Leverage is returning and is more accessible Environment
than in the last two years Western Europe
• Some sectors, such as green technology, that offer high potential to VCPE Investor World
firms are given a prime focus by European policy-makers Protection and
Corporate United States = 100 Points
Weaknesses
• Medium-term growth potential remains muted, marred by the possibility
of renewed sovereign bond tensions Separate VC and PE Indices
• Western European market remains fragmented 0
• Competition for quality assets is fierce
Opportunities 1
• The EU2020 growth agenda could promote PE investment as a source of
Index Rank
innovation
• Valuations are attractive in a number of countries 2
72 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 73
IV. Regional and country profiles
Albania
Capital: Tirana ++ Official Language: Albanian ++ Currency: Lek
Weaknesses
• One of the poorest economies in Europe Separate VC and PE Indices
• Real estate property title disputes 72
• Inadequate infrastructure, although many projects are underway to improve 73
the situation
74
• Intricate tax system
75
Index Rank
Opportunities 76
• Trade liberalization agreements between EU and Albania
77
• Gateway to the Balkans Free Trade Area; Albania is part of CEFTA
78
• EU membership is in progress; member of UN, NATO, WTO and other
international organizations 79
Threats VC PE VCPE
• Political hostility between Albania’s main parties
• High levels of government debt and current account deficit
Comparison within Peer Group
• Heavy dependence on remittances (about 15% of GDP), especially from
slow-growing southern European countries 2007 2011 Quartile
Rank Value Rank 4th 1st
Outlook Lithuania 46 41,3 57
• GDP growth in Albania is estimated to have slowed to 2.8% in 2010,
with moderate acceleration toward 4% is expected in the next few years Slovakia 48 39,1 62
• Inflation expected to be around 3% over the next few years, in line with Latvia 56 29,4 67
the Bank of Albania’s target Ukraine 67 27,8 68
• Conditions in the VCPE market have improved since 2007, but there is
Georgia 68 27,2 69
a long way to go, with ranking for 2011 still well below its peers
Moldova 71 22,0 72
Dr. Alexandros Karakitis, Ernst & Young
alexandros.karakitis@al.ey.com Macedonia 75 19,3 73
Albania 79 17,8 75
Bosnia-Herzegovina 77 17,3 76
74 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 75
IV. Regional and country profiles
Algeria
Capital: Algiers ++ Official Language: Arabic (official), French (official), Arabic (national), Tamazight (national) ++ Currency: Algerian Dinar
Quartile
Entrepr. Cult./Deal Opp. 71 25,4 70
4th 1st
GDP 157 [bn USD] IPO Volume
Population 35 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
100
Outlook 74
• Potential in mining, now that the recovery of the global economy is on
Index Rank
track 76
• Low economic growth: recovery depends on how the rest of the North
African region performs, and could be affected by political developments 78
in the region
80
Jean-Pierre Letartre, Ernst & Young
jean-pierre.letartre@fr.ey.com 82
2006 2007 2008 2009 2010 2011
VC PE VCPE
76 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 77
IV. Regional and country profiles
Argentina
Capital: Buenos Aires ++ Official Language: Spanish ++ Currency: Argentine Peso
Quartile
Entrepr. Cult./Deal Opp. 44 46,0 45
4th 1st
GDP 344 [bn USD] IPO Volume
Population 41 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
100
• Complex tax environment: generally moderate corporate taxation but with Investor Latin America
local and national tax layers to increase the complexity Protection and
Corporate United States = 100 Points
• Lack of specific framework for fund formation and operation
• Small stock exchange which does not provide significant equity financing
• Slow judicial system to enforce the corporate governance requirements Separate VC and PE Indices
Opportunities 50
• Foreign investment plays a prime role in Argentina’s economic 52
development 54
• Significant support for new investments especially for start-ups and 56
entrepreneurial activity
Index Rank
58
Threats 60
• The state became more interventionist after the crisis and has regained 62
control over a series of businesses (especially relating to public services)
64
• Renationalization of social security system has restricted institutional
investment in VCPE funds 66
discourage speculative capital inflows 2006 2007 2008 2009 2010 2011
78 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
11.Economic Activity
Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 79
IV. Regional and country profiles
Armenia
Capital: Yerevan ++ Official Language: Armenian (official), Russian ++ Currency: Dram
Quartile
Entrepr. Cult./Deal Opp. 67 34,3 60
4th 1st
GDP 8 [bn USD] IPO Volume
Population 3 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
100
• Authorities have implemented policies that should deepen the capital market 71
• Good potential for developing small hydro power plants
• Growth of IT market 72
80 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
11.Economic Activity
Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 81
IV. Regional and country profiles
Australia
Capital: Canberra ++ Official Language: English, native and other languages ++ Currency: Australian Dollar
Quartile
Entrepr. Cult./Deal Opp. 16 82,7 15
4th 1st
GDP 1193 [bn USD] IPO Volume
Population 22 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
125
100
SWOT Analysis Entrepr. Culture
75 Depth of Capital
and Deal
50
Market
Strengths Opportunities
• Strong commodity prices driving investment boom 25
• Heavy reliance on commodity cycle and comparatively high tax rates Investor Australasia
• Strong competition from both local and overseas investors Protection and
Corporate United States = 100 Points
Opportunities
• Strong stock market culture Separate VC and PE Indices
• PE exits and maturing secondary market
1
• M&A market recovering
2
Threats
• High AU$ impacting imports and domestic activity 3
• Interest rates are biased upward due to expected inflation
Index Rank
4
• Australian Tax Office (ATO) review of tax arrangements on offshore entities
• Difficult fund-raising environment 5
• Increasing competition from well-funded corporates
6
Outlook
7
• There will be pressure from LPs to exit investee companies with new fund-
raising becoming difficult 8
• Commodity-led activity will result in a two-speed economy, broadening to 2007 2008 2009 2010 2011
strong domestic demand in 2011
• Strong AU$ and high interest rates will negatively impact global VC PE VCPE
investment allocations
Comparison within Peer Group
Bryan Zekulich, Ernst & Young
bryan.zekulich@au.ey.com 2007 2011 Quartile
Rank Value Rank 4th 1st
United States 1 100,0 1
Singapore 2 92,4 4
United Kingdom 3 93,3 2
Canada 4 93,3 3
Switzerland 5 91,8 5
Australia 7 90,2 7
Japan 6 90,9 6
Sweden 8 85,0 8
New Zealand 22 72,5 19
82 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
11.Economic
Economic Activity
Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 83
IV. Regional and country profiles
Austria
Capital: Vienna ++ Official Language: German (official nationwide); Slovene, Croatian, Hungarian (each official in one region) ++ Currency: Euro
Threats
• Somewhat export oriented, which puts businesses under similar risks as Separate VC and PE Indices
those seen in Germany 20
Outlook 21
• Austria will remain a niche market, but might be used as base for Eastern
European 22
Index Rank
27
2006 2007 2008 2009 2010 2011
VC PE VCPE
84 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 85
IV. Regional and country profiles
Bahrain
Capital: Manama ++ Official Language: Arabic ++ Currency: Bahraini Dinar
Quartile
Entrepr. Cult./Deal Opp. 73 17,4 72
4th 1st
GDP 23 [bn USD] IPO Volume
Population 1 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
100
• Risk from oil price movements, as exports and services are highly Investor Middle East
vulnerable to changes in demand in the extremely oil-dependent Gulf Protection and
Corporate United States = 100 Points
sub-region
• Partially transparent public finances, due to the persistence of opaque
“extra-budgetary transactions” Separate VC and PE Indices
Opportunities 35
• The Kingdom is a leading force in the development of Islamic finance 40
• A package of labor market reforms backed by the Economic Development
Board should improve productivity and boost growth 45
• Large-scale investments have created a decent infrastructure, including
Index Rank
50
telecoms and a modern road system between towns
55
Threats
• As the dinar is pegged to the US dollar, dollar weakness is leading to 60
imported inflation
65
• There are high rates of unemployment and poverty among the Shia
population 70
• Due to the recent political unrest, measures of credit risk have increased as 2006 2007 2008 2009 2010 2011
86 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 87
IV. Regional and country profiles
Belgium
Capital: Brussels ++ Official Language: Dutch (Flemish), French, German (all official) ++ Currency: Euro
Outlook
• Belgium is in a good position compared with other countries Separate VC and PE Indices
• Valuation multiples will increase due to economic recovery in the 10
Netherlands 12
Marcel van Rijnswou, Ernst & Young 14
marcel.van.rijnswou@nl.ey.om
Index Rank
16
18
20
22
24
26
2006 2007 2008 2009 2010 2011
VC PE VCPE
88 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
11.Economic Activity
Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 89
IV. Regional and country profiles
Bosnia-Herzegovina
Capital: Sarajevo ++ Official Language: Bosnian, Croatian, Serbian ++ Currency: Convertible Mark
75
SWOT Analysis Entrepr. Culture
Depth of Capital
and Deal 50 Market
Opportunities
Strengths 25
• Well-capitalized and relatively competitive banking sector
0
• Fixing the currency to the euro has helped anchor macroeconomic policy
• Relatively flexible labor market
Human and
Weaknesses Social Taxation
Environment
• Complicated political and constitutional structure has been a hindrance
Bosnia-Herzegovina
to reform
• Weak enforcement of the judicial system Investor Eastern Europe
• Privatization program has virtually stalled; sale of major companies in Protection and
Corporate United States = 100 Points
the aluminum, construction, telecommunications and trade sectors is
necessary to promote competitiveness
• Development of capital markets is at a low level Separate VC and PE Indices
• Unemployment is persistently high, at over 30% 73
• Low standard of education (only 67% of children attend secondary
74
education)
• Low levels of innovation (R&D spending is only 0.03% of GDP) 75
Index Rank
Opportunities 76
• Some investment and liberalizations in railways will provide better
77
transport infrastructure
• Strengthening of the deposit insurance scheme will underpin stability in 78
the banking sector
79
• Some political appetite for moving forward with privatization
• Regional trade liberalization has expanded, leading to increased 80
competition in domestic agricultural markets 2006 2007 2008 2009 2010 2011
Threats VC PE VCPE
• The Government has failed to implement fiscal reform
• High costs and low competition may limit capital spending
Comparison within Peer Group
• Political deadlock could endanger economic recovery
• Structural rigidities have led to a weak investment environment 2007 2011 Quartile
• Export-driven growth leaves the economy vulnerable to external shocks Rank Value Rank 4th 1st
• FDI has been diverted to more politically stable neighbors Lithuania 46 41,3 57
90 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 91
IV. Regional and country profiles
Brazil
Capital: Brasilia ++ Official Language: Portuguese ++ Currency: Brazilian Real
Quartile
Entrepr. Cult./Deal Opp. 70 43,0 50
4th 1st
GDP 1910 [bn USD] IPO Volume
Population 195 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
125
100
SWOT Analysis Entrepr. Culture
75 Depth of Capital
and Deal
50
Market
Strengths Opportunities
• Around one-third of all M&A transactions involving PE in 2010 25
• PE-backed IPOs accounting for almost 30% of all IPOs in the boom years of
2006 and 2007 Human and
Social Taxation
• Low impact of recent presidential elections on economic prospects Environment
Weaknesses Brazil
• VCPE is still in its infancy in Brazil and not well known in the market Investor Latin America
• Limited debt and credit market hindering leveraged buyout activity Protection and
Corporate United States = 100 Points
• More difficult and lengthy due diligence process compared with more
mature economies
• PE deals dominated by relatively small transactions (average deal size of Separate VC and PE Indices
US$30m-US$60m) 30
Opportunities
35
• Economy growing at an average 5% (almost 8% in 2010) with significant
increase in the number of middle-class families rising from low income in 40
the last 5 to 10 years
Index Rank
investors
55
• Low penetration of VCPE investment in the economy compared with more
mature economies 60
• High demand for infrastructure investments, including for the 2014 World 2006 2007 2008 2009 2010 2011
Cup and 2016 Summer Olympics to be held in Brazil
VC PE VCPE
Threats
• Complex and bureaucratic tax and labor regulatory environment
Comparison within Peer Group
• A more active local capital market is giving local entrepreneurs more choice,
and increasing competition for PE companies 2007 2011 Quartile
• Remaining uncertainties and risks with respect to inflation and exchange Rank Value Rank 4th 1st
rate fluctuations Chile 30 61,5 29
• Higher competition for deals in certain industries has increased asset prices Brazil 57 48,7 43
Outlook Mexico 44 48,7 42
• It is perceived that PE backing has a positive impact on the management,
Colombia 49 45,3 47
financial and corporate governance restructure of Brazilian portfolio
companies Peru 63 41,1 59
• PE-backed IPOs tend to outperform those with no PE sponsors Uruguay 65 36,8 65
Carlos R. Asciutti, Ernst & Young Argentina 60 36,4 66
carlos.asciutti@br.ey.com Ecuador 74 17,9 74
Paraguay 80 15,7 78
92 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 93
IV. Regional and country profiles
Bulgaria
Capital: Sofia ++ Official Language: Bulgarian, Turkish, Roma ++ Currency: Bulgarian Lev
75
SWOT Analysis Entrepr. Culture
Depth of Capital
and Deal 50 Market
Opportunities
Strengths 25
• Macroeconomic stability
0
• Excellent tax environment
• Cost advantage
Human and
• Increasing number of investment opportunities Social Taxation
Environment
Weaknesses
Bulgaria
• Fragile and underdeveloped M&A market
• Relatively small deal size Investor Eastern Europe
• Below standard quality of target information Protection and
Corporate United States = 100 Points
• Restricted bank financing to corporates
Opportunities Separate VC and PE Indices
• Emerging market with high growth potential
44
• Significant growth opportunities in the service sector
• EU funding (including grants) available for a number of sectors 46
Threats 48
• Slow recovery from the downturn
Index Rank
50
• Small market
• Government policies 52
Outlook 54
• The VCPE market in Bulgaria is still recovering from the crisis, with activity
56
lagging behind other Central Eastern Europe markets
• Opportunities are expected to arise from smaller size deals and niche 58
segments 2006 2007 2008 2009 2010 2011
94 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 95
IV. Regional and country profiles
Canada
Capital: Ottawa ++ Official Language: English, French (both official); other ++ Currency: Canadian Dollar
Quartile
Entrepr. Cult./Deal Opp. 7 89,3 8
4th 1st
GDP 1556 [bn USD] IPO Volume
Population 34 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
125
100
SWOT Analysis Entrepr. Culture
75 Depth of Capital
and Deal
50
Market
Strengths Opportunities
• Well-regulated banking sector which underpins financial stability 25
in 2010
• Small budget deficits (4%) compared with most developed countries Human and
Social Taxation
• Net exporter of energy Environment
• Well-run legal system, similar to that of the US Canada
• High standards of education with a well-educated workforce
Investor North America
Weaknesses Protection and
Corporate United States = 100 Points
• Loss of competitiveness vis-à-vis the US, due to an appreciation of
currency and slower productivity growth
• Less mature VCPE market than in the US Separate VC and PE Indices
• Close integration with US capital markets, leaving Canadian markets 0
vulnerable to shocks
• Relatively length and costly enforcement of contracts 1
2
Opportunities
• High energy prices create investment opportunities in the Alberta Oil Sands 3
Index Rank
• Proximity to the US gives Canada access to the largest VCPE market in the 7
world 8
96 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 97
IV. Regional and country profiles
Chile
Capital: Santiago ++ Official Language: Spanish ++ Currency: Chilean Peso
Quartile
Entrepr. Cult./Deal Opp. 33 50,0 37
4th 1st
GDP 197 [bn USD] IPO Volume
Population 17 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
125
100
SWOT Analysis Entrepr. Culture
75 Depth of Capital
and Deal
50
Market
Strengths Opportunities
• Strong and developed capital market 25
earthquakes)
• Laws on VCPE funds formation and operation, and regulations to stimulate Human and
Social Taxation
the VCPE industry Environment
• Low levels of corruption: ranked 21 of 178 countries in Transparency Chile
International’s 2010 Corruption Perceptions Index
• Considerable entrepreneurial dynamism Investor
Protection and
Latin America
• Transparent and clearly defined legislation concerning foreign investment: Corporate United States = 100 Points
foreign investors enjoy the same rights as nationals and are able to
operate in all but a few restricted areas Separate VC and PE Indices
• Simplified procedures to obtain the Chilean tax identification number
required for inward investments 25
Weaknesses 28
Index Rank
• Double taxation for foreign investors from most countries, with a complex 29
tax environment 30
• Slow judicial system: court proceedings can be subject to long delays, and 31
high costs remain a barrier to pursuing legal actions
32
• Low levels of market capitalization, in addition to high costs of meeting
33
listing requirements, limiting accessibility of IPOs for the majority of SMEs
34
Opportunities 2006 2007 2008 2009 2010 2011
• Pension funds and insurance companies are an important source of long-
term financing and are allowed to invest in VCPE funds. However, these VC PE VCPE
investments are limited to a small percentage of their assets
Comparison within Peer Group
Threats
• A certain level of legal protection for property rights, although 2007 2011 Quartile
enforcement has been questioned Rank Value Rank 4th 1st
• The cost of protecting trademarks and patents is high, and the country Chile 30 61,5 29
remains on the US Special 301 Watch List for intellectual property violations
Brazil 57 48,7 43
Outlook Mexico 44 48,7 42
• Chile has a well-developed and experienced VCPE industry
Colombia 49 45,3 47
• Chile's environment is characterized by a positive attitude toward foreign
investment, good infrastructural quality and a relatively liberal labor market Peru 63 41,1 59
98 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 99
IV. Regional and country profiles
China
Capital: Beijing ++ Official Language: Standard Mandarin Chinese ++ Currency: Chinese Yuan (Renminbi)
Quartile
Entrepr. Cult./Deal Opp. 24 66,0 23
4th 1st
GDP 5365 [bn USD] IPO Volume
Population 1334 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
150
125
SWOT Analysis Entrepr. Culture 100
Depth of Capital
and Deal 75 Market
Strengths Opportunities 50
• Strong and stable GDP growth over the medium term 25
• Large pool of potential PE investments and price-to-earnings ratios at 0
Opportunities 20
• China has the ability to get ahead of developed economies in the adoption 22
of green technologies 24
• Greater provision of a range of financial instruments for consumers and 26
corporates will be a necessary part of financial sector reform for China 28
over the next 10 years 30
32
Threats
2006 2007 2008 2009 2010 2011
• An oversupply in some segments of the property market may render it
vulnerable to asset price volatility
VC PE VCPE
• Certain regulatory approvals can take some time, relying on local
knowledge such as the process for IPO approval
Comparison within Peer Group
Outlook
2007 2011 Quartile
• Real GDP growth is expected to average 8% over the next 10 years
Rank Value Rank 4th 1st
• There is a large amount of state-controlled sources for PE firms, including
5% of domestic insurance companies’ assets and the National Social Singapore 2 92,4 4
Security Fund, which manages China’s pension resources and represents Japan 6 90,9 6
the world’s largest pool of investment capital for PE Hong Kong 15 76,5 16
Lawrence Lau, Ernst & Young Korea, South 11 75,7 17
lawrence.lau@cn.ey.com
China 25 72,3 20
Malaysia 21 72,5 18
Taiwan 27 62,4 27
India 26 61,4 30
Thailand 28 59,3 34
100 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 101
IV. Regional and country profiles
Colombia
Capital: Bogota ++ Official Language: Spanish ++ Currency: Colombian Peso
Quartile
Entrepr. Cult./Deal Opp. 43 45,5 46
4th 1st
GDP 267 [bn USD] IPO Volume
Population 46 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
100
52
Opportunities
• VCPE investments have significantly increased since 2008 54
Threats
VC PE VCPE
• High perception of corruption and weak judicial system
• Security still remains a concern (specially in some rural areas)
Comparison within Peer Group
Outlook
2007 2011 Quartile
• The upward trend in FDI will remain in 2011 as the Government considers
Rank Value Rank 4th 1st
this to be one of the main engines of economic growth for the coming
years Chile 30 61,5 29
• Colombia is likely to receive an investment grade status during Q2 of 2011 Brazil 57 48,7 43
• Inflation is likely to remain under control and at historically low levels Mexico 44 48,7 42
Luz María Jaramillo, Ernst & Young Colombia 49 45,3 47
Luz.Jaramillo@co.ey.com
Peru 63 41,1 59
Uruguay 65 36,8 65
Argentina 60 36,4 66
Ecuador 74 17,9 74
Paraguay 80 15,7 78
102 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 103
IV. Regional and country profiles
Croatia
Capital: Zagreb ++ Official Language: Croatian ++ Currency: Croatian Kuna
Quartile
Entrepr. Cult./Deal Opp. 35 49,5 38
4th 1st
GDP 64 [bn USD] IPO Volume
Population 4 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
125
100
SWOT Analysis Entrepr. Culture
75 Depth of Capital
and Deal
50
Market
Strengths Opportunities
25
• Significant demand for all types of financing
• Government strategy for innovations (BICRO and CRANE) 0
50
entrepreneurship
• Reduced availability of debt financing and general illiquidity
55
Outlook
• The Croatian market is traditionally bank oriented, and reduced access 60
to bank loans for SMEs is expected to provide a platform for more VCPE
activities 65
• Hidden values are expected to be increasingly tapped by VCPE in the near 2006 2007 2008 2009 2010 2011
future
VC PE VCPE
Balazs Tuske, Ernst & Young
balazs.tuske@hu.ey.com
Comparison within Peer Group
2007 2011 Quartile
Rank Value Rank 4th 1st
Hungary 43 52,0 40
Slovenia 45 46,8 45
Estonia 41 44,8 49
Bulgaria 50 44,1 51
Croatia 55 43,4 52
Romania 47 41,0 60
Lithuania 46 41,3 57
Slovakia 48 39,1 62
Latvia 56 29,4 67
104 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 105
IV. Regional and country profiles
Czech Republic
Capital: Prague ++ Official Language: Czech ++ Currency: Czech Koruna
Opportunities 32
• Many good companies with poor financial management 33
Index Rank
Threats VC PE VCPE
• Foreign currency exchange (FX) volatility (postponement of a decision
regarding Euro adoption to the next government i.e., 2014)
Comparison within Peer Group
• Negative impact of cuts in government spending on economic growth
• Uncertain impact of a global economic recovery on the prospects of an 2007 2011 Quartile
export-oriented economy Rank Value Rank 4th 1st
Poland 35 57,4 36
Outlook
• Continuing recovery of VCPE opportunities to execute leveraged Czech Republic 34 55,0 37
transaction with companies showing reasonable growth prospects Turkey 31 52,8 39
Lubos Kratochvil, Ernst & Young Hungary 43 52,0 40
lubos.kratochvil@cz.ey.com Slovenia 45 46,8 45
Estonia 41 44,8 49
Bulgaria 50 44,1 51
Croatia 55 43,4 52
Romania 47 41,0 60
106 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 107
IV. Regional and country profiles
Denmark
Capital: Copenhagen ++ Official Language: Danish ++ Currency: Danish Krone
Opportunities
• The VCPE model receives positive interest from the public Separate VC and PE Indices
• Mid-size PE houses have raised funds recently
0
• Good entrepreneurship in technologies and products
• Human resource environment is business friendly
5
Threats
• Financial market is still repositioning on the back of the financial crisis
Index Rank
10
• Imbalance between financing opportunities and market pricing on
companies 15
• Competition from industrial buyers
Outlook 20
108 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 109
IV. Regional and country profiles
Ecuador
Capital: Quito ++ Official Language: Spanish ++ Currency: U.S. Dollar
Quartile
Entrepr. Cult./Deal Opp. 75 11,9 77
4th 1st
GDP 62 [bn USD] IPO Volume
Population 14 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
100
72
Opportunities
73
• Global energy demand is likely to increase, outpacing oil supply growth,
74
leading to higher oil prices and higher revenues for oil producers, like Ecuador
75
Threats
76
• Ecuador’s economic performance is vulnerable to international
77
developments due to its dependence on commodities
2006 2007 2008 2009 2010 2011
• The Government seeks to increase state control over the country’s
strategic sectors
VC PE VCPE
• Foreign investors, specifically from the oil and gas sectors, have been
engaged in disputes with the Government over fiscal matters
Comparison within Peer Group
• As of 2010, Ecuador is no longer a member of ICSID (International Centre
for Settlement of Investment Disputes), which may impact investor 2007 2011 Quartile
confidence Rank Value Rank 4th 1st
• Ecuador has unilaterally rescinded several foreign investment protection Brazil 57 48,7 43
agreements
Mexico 44 48,7 42
Outlook Colombia 49 45,3 47
• The outlook for Ecuador is uncertain: lower oil prices and weaker external
Peru 63 41,1 59
demand could dampen the country’s major sources of foreign currency
(US$) and public sector revenue Uruguay 65 36,8 65
• Foreign investment has been jeopardized by the new constitution, which Argentina 60 36,4 66
prioritizes national over foreign investment
Ecuador 74 17,9 74
Milton Vasconez, Ernst & Young Paraguay 80 15,7 78
milton.vasconez@ec.ey.com
Venezuela 73 15,2 79
110 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 111
IV. Regional and country profiles
Egypt
Capital: Cairo ++ Official Language: Arabic ++ Currency: Egyptian Pound
Quartile
Entrepr. Cult./Deal Opp. 50 32,2 65
4th 1st
GDP 216 [bn USD] IPO Volume
Population 78 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
100
in Africa
• High levels of literacy among youth and adults as well as a reasonable Human and
Social Taxation
Gini coefficient (a statistical measure of wealth distribution among people Environment
relative to its peers) (32%)
Egypt Africa
Weaknesses Investor
• Access to financial services is limited Protection and
Corporate United States = 100 Points
Opportunities
• Prospects are good in a vast range of industries including pharmaceuticals, Separate VC and PE Indices
chemicals, tourism, light manufacturing and food processing
35
• Pharmaceuticals and food processing are a priority across Africa; therefore
Egypt is well positioned to lead these sectors 40
Threats 45
• Continued uncertainty around the political trajectory
Index Rank
50
Outlook
55
• Growth is not expected to drop in the future, particularly now the global
economic recovery seems to be on track 60
• Egypt is of significance to the Middle East, due to its physical and cultural
65
proximity to the region
• The resolution of the political crisis is crucial 70
2006 2007 2008 2009 2010 2011
Abdulaziz Al-Sowailim, Ernst & Young
Abdulaziz.Al-Sowailim@sa.ey.com
VC PE VCPE
112 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 113
IV. Regional and country profiles
Estonia
Capital: Tallinn ++ Official Language: Estonian ++ Currency: ƵƌŽ
• Very flexible labor market – the crisis proved that internal devaluation is
possible Human and
Social Taxation
Weaknesses Environment
Estonia
• Small economy and, therefore, small M&A market
• Low liquidity and small size of stock exchange Investor Eastern Europe
• Dependency on the economic strength of Scandinavian countries, which Protection and
United States = 100 Points
Corporate
are the main export markets and also the main source of foreign capital
inflows
Separate VC and PE Indices
Opportunities
• Recent adoption of the euro and the resulting reduction of currency risk is 30
45
Threats
• Baltic region, which is seen as one area, eclipses the amenities of Estonia 50
• Up to 15% expected unemployment rate in the near future hinders
55
domestic demand
60
Outlook
• Adoption of the euro and the government’s continuing focus on the 65
openness of the economy should attract foreign VCPE interest 2006 2007 2008 2009 2010 2011
• Estonia’s attractiveness will also depend on economic growth prospects
compared with the other Eastern European countries VC PE VCPE
114 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 115
IV. Regional and country profiles
Finland
Capital: Helsinki ++ Official Language: Finnish, Swedish ++ Currency: Euro
Threats
• Increasing importance of globalization Separate VC and PE Indices
• Failure to maintain advanced telecom sector 0
Outlook 2
• Finland will be seen as an interesting area in which to invest 4
sakari.laine@fi.ey.com 8
10
12
14
16
18
2006 2007 2008 2009 2010 2011
VC PE VCPE
116 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 117
IV. Regional and country profiles
France
Capital: Paris ++ Official Language: French ++ Currency: Euro
Threats 15
• Only a few large funds of funds
• French emerging companies find it difficult to grow (after a few years 20
in business) and to become market leaders
Outlook 25
• Policy debate on how to drive banks and insurance investment and 2006 2007 2008 2009 2010 2011
long-term savings toward VCPE
• Impact of Solvency II, Basel III VC PE VCPE
118 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 119
IV. Regional and country profiles
Georgia
Capital: Tbilisi ++ Official Language: Georgian ++ Currency: Lari
75
SWOT Analysis Entrepr. Culture
Depth of Capital
and Deal 50 Market
Opportunities
Strengths 25
• Good medium-term GDP growth potential
0
• One of the best business environments in Eastern Europe and the
Caucasus: business start-ups are comparatively quick, with minimal
Human and
administrative requirements and hiring and low labor market frictions Social Taxation
• Very good progress in large-scale privatization (manufacturing, energy, Environment
telecommunications and health care) Georgia
• The internet services market has just started to develop, and the 65
regulatory authority aims to provide a supportive environment by 66
Index Rank
120 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 121
IV. Regional and country profiles
Germany
Capital: Berlin ++ Official Language: German ++ Currency: Euro
122 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 123
IV. Regional and country profiles
Greece
Capital: Athens ++ Official Language: Greek ++ Currency: Euro
Threats
Index Rank
36
• Confidence is at an all-time low 38
• The fear of Greece defaulting on its debt obligations is deterring a lot of
foreign investors 40
42
Outlook
• The market will continue to be difficult for VCPEs 44
• Most local PEs are nourishing existing investments rather than making 46
new ones 2006 2007 2008 2009 2010 2011
• The market has become a buyer's market; many companies are looking for
refinancing and investment VC PE VCPE
• Exits are extremely difficult
Comparison within Peer Group
Michael Chourdakis, Ernst & Young
michael.chourdakis@gr.ey.com 2007 2011 Quartile
Rank Value Rank 4th 1st
France 17 79,6 14
Belgium 18 76,8 15
Austria 23 71,7 22
Spain 20 69,1 23
Ireland 14 67,7 24
Portugal 38 60,4 31
Italy 32 59,6 32
Luxembourg 29 59,3 33
Greece 39 47,9 44
124 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 125
IV. Regional and country profiles
Hong Kong
Capital: Hong Kong ++ Official Language: Chinese, English ++ Currency: Hong Kong Dollar
Quartile
Entrepr. Cult./Deal Opp. 64 32,8 64
4th 1st
GDP 224 [bn USD] IPO Volume
Population 7 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
125
100
SWOT Analysis Entrepr. Culture
75 Depth of Capital
and Deal
50
Market
Strengths Opportunities
• Key global financial center with professional labor market and financial 25
infrastructure 0
Opportunities 4
• Large increase in use of wind and solar power in mainland China over 10
the next decade, with the aim of producing a fifth of mainland China’s 12
energy from renewable sources; this is already generating significant PE 14
transactions in Hong Kong 16
• The removal of taxes and duties on wine in 2008 has seen Hong Kong 18
become a gateway for wine trade in Asia, challenging New York for the 20
position of largest wine auction center in the world 2006 2007 2008 2009 2010 2011
Threats
VC PE VCPE
• High valuations, particularly in property sectors, may reduce the number
of transactions
Comparison within Peer Group
• Managing capital inflows and inflationary pressures with the dollar peg
remains a key challenge 2007 2011 Quartile
• The flow of IPO slowed toward the end of 2010 as mainland China began Rank Value Rank 4th 1st
tightening monetary policy, lowering share prices in Hong Kong Singapore 2 92,4 4
Outlook Japan 6 90,9 6
• Real GDP growth is expected to average 5% over the next five years Hong Kong 15 76,5 16
• Hong Kong is a key part of the growing integration of trade within Asia
Korea, South 11 75,7 17
• Hong Kong will be a key part of mainland China’s financial development
and can capitalize on this by providing a range of financial instruments China 25 72,3 20
targeted at mainland investors Malaysia 21 72,5 18
Lawrence Lau, Ernst & Young Taiwan 27 62,4 27
lawrence.lau@cn.ey.com India 26 61,4 30
Thailand 28 59,3 34
126 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 127
IV. Regional and country profiles
Hungary
Capital: Budapest ++ Official Language: Hungarian ++ Currency: Forint
economic policy 37
• Growth potential of Hungarian companies which have already invested in 39
neighboring countries; cross-border activity within the region
Index Rank
41
• Market consolidation in various industries, disposals, reorganizations of
international players 43
• Difficulty in raising finance for local players 45
• Values to be created by improving corporate culture
47
• Commencement of the EU-funded “Jeremie-Program” to help VC activities
and to encourage companies to come to market will result in viable 49
investment opportunities 51
2006 2007 2008 2009 2010 2011
Threats
• Reduced availability of debt financing VC PE VCPE
• International investor confidence
• Uncertainty regarding the government’s macroeconomic policies
Comparison within Peer Group
Outlook 2007 2011 Quartile
• Many opportunities: a growing number of deals in selected industries Rank Value Rank 4th 1st
(due to the crisis), followed by reignited economic growth, and local and Poland 35 57,4 36
regional consolidation
• Investment of EU and government funds as seed capital will create a good Czech Republic 34 55,0 37
deal flow in the technology sector in two to three years Turkey 31 52,8 39
Balazs Tuske, Ernst & Young Hungary 43 52,0 40
balazs.tuske@hu.ey.com Slovenia 45 46,8 45
Estonia 41 44,8 49
Bulgaria 50 44,1 51
Croatia 55 43,4 52
Romania 47 41,0 60
128 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 129
IV. Regional and country profiles
India
Capital: New Delhi ++ Official Language: Hindi, English ++ Currency: Indian Rupee
Quartile
Entrepr. Cult./Deal Opp. 45 38,5 54
4th 1st
GDP 1468 [bn USD] IPO Volume
Population 1185 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
125
100
SWOT Analysis Entrepr. Culture
75 Depth of Capital
and Deal
50
Market
Strengths Opportunities
• One of the fastest growing economies; high domestic consumption-driven 25
growth 0
Weaknesses
• Regulatory restrictions on foreign investment in certain sectors, albeit Separate VC and PE Indices
easing gradually 19
• Lack of availability of debt for transactions
21
Opportunities
• Significant growth in dispensable income and hence demand for products 23
Index Rank
and services
• Capital is required for core sectors (e.g., infrastructure, manufacturing, 25
health care)
27
• Stable government with a long-term secular and growth-oriented outlook
Threats 29
• Competition from emerging nations (e.g., Brazil, China) to attract foreign
31
VCPE funds
2006 2007 2008 2009 2010 2011
• The impact of proposed widespread changes in regulatory and tax policy
is not fully clear
VC PE VCPE
Outlook
• Heightened PE interest and activity levels are expected as a result of Comparison within Peer Group
broad-based economic growth, stable government and strong capital
2007 2011 Quartile
markets
Rank Value Rank 4th 1st
• Greater involvement of global funds is expected, together with the
emergence of a domestic LP community Korea, South 11 75,7 17
• Growth capital minority deals are expected to remain the major theme China 25 72,3 20
with buyouts still rare Malaysia 21 72,5 18
Mayank Rastogi, Ernst & Young Taiwan 27 62,4 27
mayank.rastogi@in.ey.com
India 26 61,4 30
Thailand 28 59,3 34
Russian Federation 37 51,1 41
Indonesia 59 45,2 48
Vietnam 62 42,2 53
130 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 131
IV. Regional and country profiles
Indonesia
Capital: Jakarta ++ Official Language: Indonesian ++ Currency: Rupiah
Quartile
Entrepr. Cult./Deal Opp. 69 34,5 59
4th 1st
GDP 670 [bn USD] IPO Volume
Population 233 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
100
infrastructure development
• The government is targeting a 15% increase in investment from 55
US$23b to US$ 27b, of which 65% from foreign investors; in 2010, total
investment increased by 54.2%, with 424 projects worth US$3.8b realized 60
in Q1 2010 alone
• Core sectors remain energy, mining, plantations and infrastructure, with 65
retail, communications and pharmaceuticals likely to experience fast- 2006 2007 2008 2009 2010 2011
growth
• If reforms to land laws are implemented, this will lead to many investment VC PE VCPE
opportunities in the property market
• Indonesia is expected to reach investment grade, improving access to finance Comparison within Peer Group
Threats 2007 2011 Quartile
• Concerns that the outcome of the 2014 presidential elections may result Rank Value Rank 4th 1st
in a potential shift of the current business and investment landscape Korea, South 11 75,7 17
• Continuous amendments in Investment’s Negative List may discourage China 25 72,3 20
foreign investors
• Unpredictable and contradictory Government policies and or regulations Malaysia 21 72,5 18
Taiwan 27 62,4 27
Outlook
• Robust growth, underpinned by strong domestic demand India 26 61,4 30
• VCPE markets will probably continue to develop quickly as the Thailand 28 59,3 34
competition from Indonesia’s neighbors is increasing
Russian Federation 37 51,1 41
Giuseppe Nicolosi, Ernst & Young Indonesia 59 45,2 48
giuseppe.nicolosi@id.ey.com
Vietnam 62 42,2 53
132 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 133
IV. Regional and country profiles
Ireland
Capital: Dublin ++ Official Language: Irish, English ++ Currency: Euro
available to investees 15
Threats 20
• Recession is significantly deeper than in other countries
• Company failures are increasing 25
134 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 135
IV. Regional and country profiles
Israel
Capital: Jerusalem ++ Official Language: Hebrew, Arabic ++ Currency: New Israeli Sheqel
Quartile
Entrepr. Cult./Deal Opp. 18 76,2 18
4th 1st
GDP 199 [bn USD] IPO Volume
Population 8 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
125
100
SWOT Analysis Entrepr. Culture
75 Depth of Capital
and Deal
50
Market
Strengths Opportunities
• Well-developed PE and VC market 25
Opportunities
• Promising environment for VC, with a high number of technology start-ups 18
• Strong growth potential, with a pronounced culture of innovation
20
• Rapidly evolving medical technology, software, media and electronics
sectors
22
• Government incentives would secure further investment of VC community
24
Threats
2006 2007 2008 2009 2010 2011
• National security is under constant threat
• Uncertainties have increased, with turmoil in a series of Arab countries, and VC PE VCPE
in particular after the regime change in Egypt; the old regime had signed
a peace treaty with Israel, now, Israel’s medium-term security outlook will be
Comparison within Peer Group
strongly influenced by the outcome of national elections in Egypt
2007 2011 Quartile
Outlook
Rank Value Rank 4th 1st
• The economy is forecast to grow at a similar rate in 2011, before growth
gradually declining to just below 4% during the next five years Israel 19 72,2 21
• Inflation is expected to pick up to 3.2% in 2011, but stabilizing at 2.7% Saudi Arabia 36 67,5 25
thereafter United Arab Emirates 33 61,6 28
• The Government deficit increased to 4.4% in 2009, but declined to 3% in
Kuwait 40 57,9 35
2010, with further narrowing expected in the next few years
Jordan 42 53,2 38
Oren Bar-On, Ernst & Young
oren.bar-on@il.ey.com Oman 51 45,6 46
Bahrain 58 44,3 50
136 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 137
IV. Regional and country profiles
Italy
Capital: Rome ++ Official Language: Italian ++ Currency: Euro
temporary workers
30
Opportunities
• Improvement in public labor productivity is expected due to performance-
Index Rank
35
linked salary to be introduced after 2010
• Progress has been made in labor productivity in the private sector, with
40
some key breakthroughs (e.g., Fiat)
• Recent reforms have set the stage for further progress (e.g., competitive
45
tendering, enhanced role of the antitrust authority, removal of obsolete
legislation, secondary school and university)
50
Threats 2006 2007 2008 2009 2010 2011
• The family-centered model of capitalism is suffering from weak corporate
governance and a generation change VC PE VCPE
• Lack of measures to attract talents from abroad or to retain Italian ones
Comparison within Peer Group
may affect growth/innovation in the long term
• Realization of crucial prospected reforms (energy, justice, bureaucracy) is 2007 2011 Quartile
currently undermined by an unusually high level of political strife Rank Value Rank 4th 1st
France 17 79,6 14
Outlook
• The latest forecasts show Italian GDP growing at around 1% both in 2011 Belgium 18 76,8 15
and 2012 — slower than the rest of the euro area — supported by soaring Austria 23 71,7 22
exports, but still affected by weak consumer spending and austerity Spain 20 69,1 23
measures imposed by the government
Ireland 14 67,7 24
Carlo Pelloni, Ernst & Young Portugal 38 60,4 31
carlo.pelloni@it.ey.com
Italy 32 59,6 32
Luxembourg 29 59,3 33
Greece 39 47,9 44
138 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 139
IV. Regional and country profiles
Japan
Capital: Tokyo ++ Official Language: Japanese ++ Currency: Yen
Quartile
Entrepr. Cult./Deal Opp. 2 102,3 1
4th 1st
GDP 5273 [bn USD] IPO Volume
Population 127 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
125
100
SWOT Analysis Entrepr. Culture
75 Depth of Capital
and Deal
50
Market
Strengths Opportunities
• The world’s third-largest economy 25
by management 6
Threats 8
• Increasingly negative sentiment toward VCPE, as VCPE investors are
10
not seen as appropriately supporting investee companies in the current
economic climate 12
• Increasingly difficult funding environment
14
• Decreasing valuations of public companies reveal missed/unfavorable
2006 2007 2008 2009 2010 2011
VCPE exit opportunities
Outlook VC PE VCPE
• More Japanese companies are likely to aim at expanding their business
into the global market, requiring additional funds and professional Comparison within Peer Group
support from VCPE
2007 2011 Quartile
• Many companies will find it increasingly hard to obtain access to
Rank Value Rank 4th 1st
additional capital and will need to deploy their capital more effectively
• Many companies will be forced to divest non-core businesses in order to Singapore 2 92,4 4
create shareholder value Japan 6 90,9 6
Satoshi Sekine, Ernst & Young Transaction Hong Kong 15 76,5 16
satoshi.sekine@jp.ey.com Korea, South 11 75,7 17
China 25 72,3 20
Malaysia 21 72,5 18
Taiwan 27 62,4 27
India 26 61,4 30
Thailand 28 59,3 34
140 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 141
IV. Regional and country profiles
Jordan
Capital: Amman ++ Official Language: Arabic ++ Currency: Jordanian Dinar
Quartile
Entrepr. Cult./Deal Opp. 54 33,0 62
4th 1st
GDP 25 [bn USD] IPO Volume
Population 6 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
125
100
SWOT Analysis Entrepr. Culture
75 Depth of Capital
and Deal
50
Market
Strengths Opportunities
• One of the most well-regulated and transparent banking systems in the 25
region 0
Weaknesses
• Relatively scant natural resources: phosphates and potash are the only Separate VC and PE Indices
significant mineral deposits, and water resources are limited 30
• Unemployment and poverty: government promises of an improved
32
welfare system and job creation have been slow to materialize
34
Opportunities
Index Rank
Threats 42
• Jordan's current account deficit and onerous debt profile create a
44
tremendous amount of downward pressure on the dinar, while additional
2006 2007 2008 2009 2010 2011
secondary pressure comes from commodity price swings and security
threats to the Middle East region
VC PE VCPE
• Lack of conventional oil reserves means that the country is vulnerable to
fluctuating global prices
Comparison within Peer Group
Outlook
2007 2011 Quartile
• With ongoing instability in Iraq, Jordan will continue to act as a safe
Rank Value Rank 4th 1st
services and logistics hub for business activity in the GCC
Israel 19 72,2 21
Samar Obaid, Ernst & Young
Saudi Arabia 36 67,5 25
samar.obaid@jo.ey.com
United Arab Emirates 33 61,6 28
Kuwait 40 57,9 35
Jordan 42 53,2 38
Oman 51 45,6 46
Bahrain 58 44,3 50
142 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 143
IV. Regional and country profiles
Kazakhstan
Capital: Astana ++ Official Language: Kazakh, Russian ++ Currency: Tenge
Quartile
Entrepr. Cult./Deal Opp. 51 38,5 55
4th 1st
GDP 126 [bn USD] IPO Volume
Population 16 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
100
50
• Perceived high levels of corruption by Eastern European standards
Opportunities 55
• Economic diversification and industrialization, particularly toward higher
value-added activities 60
• Large privatization program scheduled to begin in 2012
• Deepening local capital markets and a well-functioning government 65
benchmark yield curve 2006 2007 2008 2009 2010 2011
• Development of Single Economic Space and Customs Union with Russia
and Belarus VC PE VCPE
• Plans to join World Trade Organization
• Development of PPP to finance modernization of energy-generating and Comparison within Peer Group
transmission assets
2007 2011 Quartile
Threats Rank Value Rank 4th 1st
• A significant drop in oil and other commodity prices would impact India 26 61,4 30
economic growth
Thailand 28 59,3 34
• Particularly vulnerable to weakness in EU, and China and Russian growth
downturn Russian Federation 37 51,1 41
Indonesia 59 45,2 48
Outlook
• Conditions are likely to improve in the near future subject to speedy Vietnam 62 42,2 53
resolution of the non-performing loans issue in Kazakhstan’s financial system Philippines 53 41,2 58
Timur Pulatov, Ernst & Young Kazakhstan 54 39,1 61
timur.pulatov@kz.ey.com Armenia 72 25,3 71
Kyrgyzstan 78 14,4 80
144 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 145
IV. Regional and country profiles
Kenya
Capital: Nairobi ++ Official Language: English, Swahili ++ Currency: Kenyan Shilling
Quartile
Entrepr. Cult./Deal Opp. 62 42,7 51
4th 1st
GDP 32 [bn USD] IPO Volume
Population 41 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
100
• Because most companies in the East African Community (EAC) are cross- 66
listed on the main stock exchanges (Nairobi Stock Exchange, Jerusalem
68
Stock Exchange and Uganda Securities Exchange) one can expect there
will be a lot of corporate activity in the near future 70
• The farther the regionalization of the EAC progresses, the more one can
72
expect to see M&A or IPOs in the region
• Kenyan banks and East African airlines continue to expand, laying the 74
foundation for future M&As 2006 2007 2008 2009 2010 2011
Threats
VC PE VCPE
• Progress in Kenya’s financial markets, although it is able to lead, will
always depend on the stability of the region
Comparison within Peer Group
• The common market protocol poses a threat because regional blocs take
a long time to solidify it: this may delay some commercial decisions that 2007 2011 Quartile
could trigger M&A activity Rank Value Rank 4th 1st
146 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 147
IV. Regional and country profiles
Korea, South
Capital: Seoul ++ Official Language: Korean ++ Currency: South Korean Won
Quartile
Entrepr. Cult./Deal Opp. 8 86,4 12
4th 1st
GDP 991 [bn USD] IPO Volume
Population 49 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
125
100
SWOT Analysis Entrepr. Culture
75 Depth of Capital
and Deal
50
Market
Strengths Opportunities
• Solid, diversified economy with high standard of education 25
• A strong union culture, making labor restructuring difficult and the high
12
cost of firing
14
Opportunities
• Medium-term growth outlook among the highest of the large economies 16
• Corporate restructuring
• Major expansion in new sectors promoted by the Government, such as 18
green energy 2006 2007 2008 2009 2010 2011
Threats
VC PE VCPE
• Dominance of the economy by the large conglomerates, making it
relatively more difficult for new firms to grow, either in existing or new
Comparison within Peer Group
industries
• Perception that tensions with North Korea will raise the risk of potentially 2007 2011 Quartile
challenging developments in the Korean peninsula Rank Value Rank 4th 1st
148 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 149
IV. Regional and country profiles
Kuwait
Capital: Kuwait City ++ Official Language: Arabic ++ Currency: Kuwaiti Dinar
Quartile
Entrepr. Cult./Deal Opp. 48 41,4 53
4th 1st
GDP 126 [bn USD] IPO Volume
Population 2 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
100
• Limited success of attempts to “Kuwaitize” private sector employment Investor Middle East
• Severe impact of global financial crisis on Kuwaiti banks; elevated Protection and
Corporate United States = 100 Points
exposure to the Dubai World crisis will continue to weigh in on lending
growth in the future
Separate VC and PE Indices
Opportunities
25
• Inflation has decreased, reducing the risks to consumer spending
• The Government has ample assets in sovereign wealth and reserve funds 27
to keep the economy afloat in spite of lower oil prices 29
Threats 31
Index Rank
Outlook 39
• Kuwait’s political risk profile remains a key threat that could hurt investor 41
sentiment 2006 2007 2008 2009 2010 2011
• Kuwait is an attractive staging point for companies and investors
interested doing business in Iraq VC PE VCPE
150 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 151
IV. Regional and country profiles
Kyrgyztan
Capital: Bishkek ++ Official Language: Kyrgyz, Russian ++ Currency: Som
Quartile
Entrepr. Cult./Deal Opp. 78 8,0 80
4th 1st
GDP 5 [bn USD] IPO Volume
Population 6 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
100
• Very low GDP per capita and a small economy with GDP of less than Investor Asia
US$5b Protection and
Corporate United States = 100 Points
• Low investor confidence caused by the nationalization of the largest
private bank and six others under temporary administration
• Insufficient independence for the Kyrgyz Central Bank to conduct Separate VC and PE Indices
monetary policy successfully 74
Opportunities 75
• Privatization in energy, telecommunications and financial sectors
76
• Energy infrastructure-related investments are estimated to reach
Index Rank
152 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 153
IV. Regional and country profiles
Latvia
Capital: Riga ++ Official Language: Latvian ++ Currency: Latvian Lat
Opportunities 60
• Eurozone entry in 2014 could provide greater economic stability
• Latvia is keen to develop trade links with Russia 65
• As a result of economic crisis, the banking sector has refocused from
financing real estate development to productive and export-oriented 70
economy sectors
75
Threats
2006 2007 2008 2009 2010 2011
• The fallout from the banking collapse and subsequent slow economic
recovery has constrained banking liquidity VC PE VCPE
• The cycle of slow lending, depressed assets and falling real incomes might
be difficult to break
Comparison within Peer Group
• Longer-term growth prospects hindered by falling population and
structurally high unemployment 2007 2011 Quartile
Rank Value Rank 4th 1st
Outlook Croatia 55 43,4 52
• The economic backdrop remains challenging, but this may offer investors
attractive valuations Romania 47 41,0 60
• Foreign VCPE Houses are likely to be attracted back to Latvia if it can Lithuania 46 41,3 57
demonstrate that its economy is firmly on the road to recovery, as Slovakia 48 39,1 62
indicated by the recently increasing number of ongoing transactions by
Latvia 56 29,4 67
PE Houses
Ukraine 67 27,8 68
Raimonds Kulbergs, Ernst & Young Baltic SIA
raimonds.kulbergs@lv.ey.com Georgia 68 27,2 69
Moldova 71 22,0 72
Macedonia 75 19,3 73
154 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 155
IV. Regional and country profiles
Lithuania
Capital: Vilnius ++ Official Language: Lithuanian ++ Currency: Lithuanian Litas
Opportunities
Index Rank
Threats
Comparison within Peer Group
• Very limited credit market reopening
• Difficulties in regaining trust and interest from foreign investors 2007 2011 Quartile
Rank Value Rank 4th 1st
Outlook Estonia 41 44,8 49
• Recovery of the economy, the existence of a number of viable businesses
that survived the economic downturn and need capital for expansion, Bulgaria 50 44,1 51
privatizations, the reshuffling of capital between various owners and Croatia 55 43,4 52
positive changes in the tax legislation will attract investors and will drive Romania 47 41,0 60
the market towards higher activity
Lithuania 46 41,3 57
Rolandas Laukaitis, Ernst & Young Slovakia 48 39,1 62
rolandas.laukaitis@lt.ey.com
Latvia 56 29,4 67
Ukraine 67 27,8 68
Georgia 68 27,2 69
156 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 157
IV. Regional and country profiles
Luxembourg
Capital: Luxembourg ++ Official Language: Luxermbourgish, French, German ++ Currency: Euro
investee company 36
• VCPE structures are very relevant for investment in distressed and impact 38
finance (e.g., cleantech, microfinance, renewable energies) 2006 2007 2008 2009 2010 2011
• Modernization of the limited partnership regime
VC PE VCPE
Threats
• Duplication of available products and tax incentives by competitive
Comparison within Peer Group
locations
• Treaty access requires strict compliance with substance requirements 2007 2011 Quartile
• Constraints imposed on non-EU managers for the distribution of their Rank Value Rank 4th 1st
Luxembourg funds within Europe by the AIFM Directive France 17 79,6 14
158 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 159
IV. Regional and country profiles
Macedonia
Capital: Skopje ++ Official Language: Macedonian ++ Currency: Macedonian Denar
Threats VC PE VCPE
• A deterioration in the Eurozone could stall the export-driven recovery
• A wide trade deficit leaves the economy vulnerable to external shocks
Comparison within Peer Group
• Market reform laws have been implemented ineffectively
2007 2011 Quartile
Outlook Rank Value Rank 4th 1st
• In the medium term, GDP growth is expected to average more than 4% Lithuania 46 41,3 57
• Privatization and high capital spending will create opportunities for VCPE
in the near term Slovakia 48 39,1 62
• Risks come from the uncertainty of the economic outlook, as well as from Latvia 56 29,4 67
a weak judicial system and concerns surrounding the enforcement of Ukraine 67 27,8 68
property rights
Georgia 68 27,2 69
Fotis Demetriou, Ernst & Young Moldova 71 22,0 72
fotis.demetriou@gr.ey.com
Macedonia 75 19,3 73
Kalina Sukarova, Ernst & Young
Albania 79 17,8 75
kalina.sukarova@mk.ey.com
Bosnia-Herzegovina 77 17,3 76
160 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 161
IV. Regional and country profiles
Malaysia
Capital: Kuala Lumpur ++ Official Language: Bahasa Melayu ++ Currency: Malaysian Ringgit
Quartile
Entrepr. Cult./Deal Opp. 23 66,9 22
4th 1st
GDP 213 [bn USD] IPO Volume
Population 29 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
125
100
SWOT Analysis Entrepr. Culture
75 Depth of Capital
and Deal
50
Market
Strengths Opportunities
• Established regulatory framework and financial markets, both 25
private corporations/equity
• Several GLICs hold substantial direct investments in related enterprises 18
which provide attractive consolidation opportunities
20
• Liberalization of foreign equity restrictions should widen the spectrum of
opportunities in PIPEs and buyouts by foreign funds
22
Threats
24
• Increased competition for already limited quality deals by special purpose
2006 2007 2008 2009 2010 2011
acquisition companies (SPACs) that raise public capital
• Government-driven national PE management company’s (Ekuinas’) VC PE VCPE
participation in direct investments as well as acting as fund of funds
Outlook Comparison within Peer Group
• Cautious optimism is returning, but competition in the industry is likely
2007 2011 Quartile
to increase
Rank Value Rank 4th 1st
Kevin Chew, Ernst & Young Hong Kong 15 76,5 16
kevin.chew@my.ey.com
Korea, South 11 75,7 17
China 25 72,3 20
Malaysia 21 72,5 18
Taiwan 27 62,4 27
India 26 61,4 30
Thailand 28 59,3 34
Russian Federation 37 51,1 41
Indonesia 59 45,2 48
162 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 163
IV. Regional and country profiles
Mexico
Capital: Mexico City ++ Official Language: Spanish ++ Currency: Mexican Peso
Quartile
Entrepr. Cult./Deal Opp. 31 49,2 39
4th 1st
GDP 996 [bn USD] IPO Volume
Population 109 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
100
international standards
• Adoption of IFRS for listed companies scheduled for 2012 Human and
Social Taxation
Weaknesses Environment
• Lack of proper VCPE fund formation and operation regulations Mexico
Opportunities 41
• Regulation provides strong protection for minority shareholder’s rights
Index Rank
42
• Recently adopted reforms in the investment regime of pension funds
(Afores) now allow pension funds to invest in PE/VC funds. 43
• Improvement in the amount and quality of entrepreneurial activity,
44
including programs sponsored by the Government
• Low inflation levels 45
• Mexico presents a favorable commercial environment with a large
46
and increasingly sophisticated domestic market, making it a growing
2006 2007 2008 2009 2010 2011
destination for trade and investment
Outlook VC PE VCPE
• The economy remains overly reliant on US demand, and is closely tied
to the US economic cycle, leaving the country vulnerable to economic Comparison within Peer Group
difficulties in the US
2007 2011 Quartile
• GDP growth prospects for 2011 and beyond assume a lower contribution
Rank Value Rank 4th 1st
of exports and an increasing role of local demand
• Capital inflow levels are expected to return progressively to pre-crisis levels Chile 30 61,5 29
• The local environment is well positioned to assimilate the presidential Brazil 57 48,7 43
elections scheduled for 2012 Mexico 44 48,7 42
Victor A. Tiburcio, Ernst & Young Colombia 49 45,3 47
Alberto.Tiburcio@mx.ey.com
Peru 63 41,1 59
Uruguay 65 36,8 65
Argentina 60 36,4 66
Ecuador 74 17,9 74
Paraguay 80 15,7 78
164 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 165
IV. Regional and country profiles
Moldova
Capital: Chisinau ++ Official Language: Moldovan (Romanian) ++ Currency: Moldovan Leu
75
SWOT Analysis Entrepr. Culture
Depth of Capital
and Deal 50 Market
Opportunities
Strengths 25
• Strong recovery of industrial production and trade in 2010
0
• IMF and EU development assistance ensures financing of external deficit
• Financial sector relatively sound; banks remain liquid with minimal
Human and
exposure to toxic assets Social Taxation
Environment
Weaknesses
Moldova
• Europe’s poorest country – GDP per person around US$3,000 (purchasing
power parity) Investor Eastern Europe
• Underdeveloped private sector Protection and
Corporate United States = 100 Points
• Non-transparent ownership of banks and inadequate corporate governance
• Limited access to finance for SMEs
• Poor governance and perceived high levels of corruption in public sector Separate VC and PE Indices
and the police 67
• Weak government: a series of indeterminate elections has left the political
direction unclear 68
Opportunities 69
Index Rank
• World Bank support for social assistance, education, justice and infrastructure
in 2011; further talks of initiating projects to improve the investment climate 70
and facilitate development of the private sector are under way
71
• Autonomous trade preferences extended in 2008 – likely to diversify
exports and stimulate economic growth 72
• Simplification of FDI regulations to attract capital inflows from the EU
• 0% Corporate Income Tax and competitive Personal Income Tax rates 73
compared with other countries 2006 2007 2008 2009 2010 2011
Threats VC PE VCPE
• Ongoing political tension with Russia over Russian troops in breakaway
territory of Transnistria
Comparison within Peer Group
• Over-dependence on Russia for energy (petroleum, coal and natural gas)
• Unsustainable level of public finances 2007 2011 Quartile
• High levels of emigration Rank Value Rank 4th 1st
Lithuania 46 41,3 57
Outlook
• Economic growth is expected to increase, driven by international demand Slovakia 48 39,1 62
from main trading partners – particularly the EU Latvia 56 29,4 67
• Upward inflationary pressures due to increases in energy tariffs, depreciation Ukraine 67 27,8 68
of exchange rate and increase in excise taxes pose risk to growth
Georgia 68 27,2 69
• External factors, e.g., high volatility of remittances and uncertainty over
export demand, will impact growth, in part because of the trade restrictions Moldova 71 22,0 72
(on Moldovan agricultural exports) implemented in Russia Macedonia 75 19,3 73
Alexander Milcev, Ernst & Young Albania 79 17,8 75
alexander.milcev@ro.ey.com Bosnia-Herzegovina 77 17,3 76
166 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 167
IV. Regional and country profiles
Morocco
Capital: Rabat ++ Official Language: Arabic ++ Currency: Moroccan Dirham
Quartile
Entrepr. Cult./Deal Opp. 63 33,7 61
4th 1st
GDP 91 [bn USD] IPO Volume
Population 32 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
100
private sector
• A range of mineral resources, including coal, nickel, uranium, zinc and gold Human and
Social Taxation
• Low cost of exports and imports Environment
Weaknesses Morocco
• Low access to financial services for over 65% of the population Investor Africa
Protection and
Opportunities Corporate United States = 100 Points
• Depending on stability in the region, with regard to Algeria and the
deadlock in the Western Sahara (Africa’s longest running territorial Separate VC and PE Indices
dispute), Morocco could follow the lead of other North African countries
50
in strengthening its ties with Europe, while exploiting the opportunities of
expanding its enterprises into the rest of the continent 52
• The country is pursuing membership of the European Union, which could 54
be advantageous for economic growth
56
Index Rank
Threats 58
• Political unrest in Morocco may ensue in connection with the deadlock in
the Western Sahara 60
62
Outlook
• More Moroccan companies could expand into the rest of the continent, 64
168 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 169
IV. Regional and country profiles
Namibia
Capital: Windhoek ++ Official Language: English ++ Currency: Namibian Dollar
Quartile
Entrepr. Cult./Deal Opp. 74 13,9 75
4th 1st
GDP 10 [bn USD] IPO Volume
Population 2 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
100
South Africa
Human and
Weaknesses Social Taxation
• Despite growth in the mining industry, the Mining Charter, currently under Environment
consideration, could slow down some of the corporate activity Namibia
Outlook 64
• Namibia’s economic activity will continue to track that of South Africa:
for example, in interest rate movements and currency fluctuations 66
Index Rank
74
2007 2008 2009 2010 2011
VC PE VCPE
170 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
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1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 171
IV. Regional and country profiles
Netherlands
Capital: Amsterdam ++ Official Language: Dutch ++ Currency: Euro
Threats 7
• LPs look at risk, return and liquidity of VCPE funds more critically than
pre-crisis 9
• Wall of maturity, refinancing of large amounts of debt through 2013-15
• Capital moves to emerging markets 11
Outlook 13
• Market sentiments are still depressed; however, VCPE market is in recovery 2006 2007 2008 2009 2010 2011
• Valuation multiples will increase due to economic recovery in the
Netherlands VC PE VCPE
• Larger buyouts will make a comeback
• High M&A volume and more secondary buyout transactions are Comparison within Peer Group
anticipated 2007 2011 Quartile
Marcel van Rijnswou, Ernst & Young Rank Value Rank 4th 1st
marcel.van.rijnswou@nl.ey.om United Kingdom 3 93,3 2
Switzerland 5 91,8 5
Sweden 8 85,0 8
Netherlands 10 84,3 9
Germany 16 82,8 10
Finland 9 82,3 11
Denmark 13 81,8 12
Norway 12 81,0 13
France 17 79,6 14
172 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 173
IV. Regional and country profiles
New Zealand
Capital: Wellington ++ Official Language: English, Māori ++ Currency: New Zealand Dollar
Quartile
Entrepr. Cult./Deal Opp. 20 75,9 19
4th 1st
GDP 128 [bn USD] IPO Volume
Population 4 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
125
100
SWOT Analysis Entrepr. Culture
75 Depth of Capital
and Deal
50
Market
Strengths
Strengths Opportunities
•
• Limited liability partnership regime, consistent with global investment
25
structures 0
21
• Deleveraging impact is reducing the availability of credit and debt for
corporate transactions 23
• There is uncertainty around the timing of economic recovery
25
• Australia- and New Zealand-based LPs are reducing exposure to the PE
industry, leading to fewer managers over time 27
Outlook 29
• There are positive buying opportunities given the recessionary economy 2006 2007 2008 2009 2010 2011
and weak NZ$
• GDP growth is slowly recovering in a tough economic environment VC PE VCPE
• New Zealand is hosting the 2011 Rugby World Cup
• 2011 is election year (November), with the asset sales program a key issue, Comparison within Peer Group
particularly for New Zealand capital markets
2007 2011 Quartile
Andrew Taylor, Ernst & Young Rank Value Rank 4th 1st
andrew.taylor@nz.ey.com United States 1 100,0 1
Singapore 2 92,4 4
United Kingdom 3 93,3 2
Canada 4 93,3 3
Switzerland 5 91,8 5
Australia 7 90,2 7
Japan 6 90,9 6
Sweden 8 85,0 8
New Zealand 22 72,5 19
174 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 175
IV. Regional and country profiles
Nigeria
Capital: Abuja ++ Official Language: English ++ Currency: Naira
Quartile
Entrepr. Cult./Deal Opp. 57 28,9 67
4th 1st
GDP 208 [bn USD] IPO Volume
Population 158 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
100
176 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 177
IV. Regional and country profiles
Norway
Capital: Oslo ++ Official Language: Norwegian (Bokmål and Nynorsk) ++ Currency: Norvegian Krone
7
greatest opportunities
• Innovation has an increasingly high ranking 9
• A significant number of IPOs are expected to take place during 2011; IPOs 11
are again viewed as an exit opportunity
13
Threats 15
• Norway has an over-heated economy and increasing interest rates
17
Outlook 2006 2007 2008 2009 2010 2011
• Norway remains attractive for overseas investors, especially with an
economy at full speed, low unemployment rates and strong focus towards VC PE VCPE
energy and oil services
• The strong domestic economy should provide further investment Comparison within Peer Group
opportunities 2007 2011 Quartile
Vegard Stevning, Ernst & Young Rank Value Rank 4th 1st
vegard.stevning@no.ey.com United Kingdom 3 93,3 2
Switzerland 5 91,8 5
Sweden 8 85,0 8
Netherlands 10 84,3 9
Germany 16 82,8 10
Finland 9 82,3 11
Denmark 13 81,8 12
Norway 12 81,0 13
France 17 79,6 14
178 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 179
IV. Regional and country profiles
Oman
Capital: Muscat ++ Official Language: Arabic ++ Currency: Rial Omani
Quartile
Entrepr. Cult./Deal Opp. 53 32,9 63
4th 1st
GDP 62 [bn USD] IPO Volume
Population 3 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
100
• Maturity of Omani oil fields and decline in oil production, meaning that, Investor Middle East
at current output levels, known oil reserves will be exhausted within 20 years; Protection and
Corporate United States = 100 Points
in response, the Omani Government has prioritized the production and
export of natural gas
Separate VC and PE Indices
Opportunities
40
• Construction is booming around the industrial port of Sohar, though most
services depend on a healthy oil economy 42
• A free trade agreement with the US came into force in January 2009 making 46
Index Rank
consumer and industrial merchandise trade duty free, the aim being to 48
180 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 181
IV. Regional and country profiles
Paraguay
Capital: Asunción ++ Official Language: Spanish, Guaraní ++ Currency: Guaraní
Quartile
Entrepr. Cult./Deal Opp. 79 10,5 79
4th 1st
GDP 17 [bn USD] IPO Volume
Population 6 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
100
Threats 72
75
• No restrictions on investments 76
Outlook 77
• The macroeconomic environment has been positive during 2010 and the 78
outlook for 2011 remains positive 79
• Paraguay is on an upward trend of developing changes to promote further 80
foreign investment 81
2006 2007 2008 2009 2010 2011
Rafael López Fracchina, Ernst & Young
Rafael.Lopez-Fracchia@py.ey.com
VC PE VCPE
182 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 183
IV. Regional and country profiles
Peru
Capital: Lima ++ Official Language: Spanish, Quéchua ++ Currency: Nuevo Sol
Quartile
Entrepr. Cult./Deal Opp. 55 29,0 66
4th 1st
GDP 146 [bn USD] IPO Volume
Population 29 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
100
• IPOs have come back to Peruvian capital markets, which could represent
an exit strategy for VCPE funds in the future 55
Threats 60
• IP protection is regulated; however, enforcement has been an issue
• The tax environment is complex and taxation for VCPE is expensive, 65
but tax stability agreements to increase investor attractiveness have
70
been reached
2006 2007 2008 2009 2010 2011
• Regulatory frameworks for fund formation and operation remain
incomplete, and capital market reform projects to improve VCPE have
VC PE VCPE
been delayed for a number of years
Outlook Comparison within Peer Group
• Economic activity looks set to remain well supported by private demand
2007 2011 Quartile
and investment and the outlook for 2011 is positive
Rank Value Rank 4th 1st
• Recent changes to Peruvian regulations are allowing increased activity
• Under Alan Garcia’s presidency, Peru has maintained an aggressive trade Chile 30 61,5 29
policy that has allowed it to sign free trade agreements with the US, Brazil 57 48,7 43
Chile, Singapore, Thailand, China, Canada and the Republic of Korea Mexico 44 48,7 42
Jorge Hernando Medina, Ernst & Young Colombia 49 45,3 47
jorge.medina@pe.ey.com
Peru 63 41,1 59
Uruguay 65 36,8 65
Argentina 60 36,4 66
Ecuador 74 17,9 74
Paraguay 80 15,7 78
184 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 185
IV. Regional and country profiles
Philippines
Capital: Manila ++ Official Language: Filipino (based on Tagalog), English ++ Currency: Philippine Peso
Quartile
Entrepr. Cult./Deal Opp. 66 28,3 68
4th 1st
GDP 181 [bn USD] IPO Volume
Population 94 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
100
Threats
VC PE VCPE
• Economic reform is slow
• There is a perception of widespread corruption and security issues
Comparison within Peer Group
Outlook
2007 2011 Quartile
• Broad-based consumer demand and resurgent exports and investments
Rank Value Rank 4th 1st
should support economic growth, with the potential for higher growth if
substantial infrastructure reforms are undertaken India 26 61,4 30
• Global outsourcing is expected to accelerate Thailand 28 59,3 34
• Sustained economic growth in the Asian region will provide the Philippines Russian Federation 37 51,1 41
a major source of skilled workers
Indonesia 59 45,2 48
Renato J. Galve, Ernst & Young
Vietnam 62 42,2 53
renato.j.galve@ph.ey.com
Philippines 53 41,2 58
Alexander Dacanay, Ernst & Young
Kazakhstan 54 39,1 61
alexander.e.dacanay@ph.ey.com
Armenia 72 25,3 71
Kyrgyzstan 78 14,4 80
186 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 187
IV. Regional and country profiles
Poland
Capital: Warsaw ++ Official Language: Polish ++ Currency: Złoty
75
SWOT Analysis Entrepr. Culture
Depth of Capital
and Deal 50 Market
Opportunities
Strengths 25
• Stable macroeconomic situation with good growth prospects
0
• Size of market and continuous growth of entrepreneurial base
• Good availability of financing and funds
Human and
• High absorption of EU funds and growing infrastructure investments Social Taxation
• Change in perception of VCPE: from rescue in a crisis situation to a good Environment
source of experience and knowledge of international markets, and a chance Poland
for a company’s international expansion
Investor Eastern Europe
Weaknesses Protection and
Corporate United States = 100 Points
• Stable macroeconomic growth factors threatened by high unemployment
rate and high level of public debt
• Highly competitive market Separate VC and PE Indices
• High pricing expectations of sellers and excessive company valuations 30
Opportunities
32
• Positive signals from the market and stable investor confidence levels
• High level of FDI increased by privatization programs 34
Index Rank
188 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 189
IV. Regional and country profiles
Portugal
Capital: Lisbon ++ Official Language: Portuguese ++ Currency: Euro
Threats
35
• Small size of domestic market
• Low growth of Portuguese economy
40
Outlook
• Increase of distressed asset deals 45
• Modest levels of fund-raising and investment 2006 2007 2008 2009 2010 2011
• Buyouts penalized by difficult credit environment
VC PE VCPE
José Gonzaga Rosa, Ernst & Young
jose.gonzaga-rosa@pt.ey.com
Comparison within Peer Group
Miguel Farinha, Ernst & Young 2007 2011 Quartile
miguel.farinha@pt.ey.com Rank Value Rank 4th 1st
France 17 79,6 14
Belgium 18 76,8 15
Austria 23 71,7 22
Spain 20 69,1 23
Ireland 14 67,7 24
Portugal 38 60,4 31
Italy 32 59,6 32
Luxembourg 29 59,3 33
Greece 39 47,9 44
190 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 191
IV. Regional and country profiles
Romania
Capital: Bucharest ++ Official Language: Romanian ++ Currency: Romanian Leu
75
SWOT Analysis Entrepr. Culture
Depth of Capital
and Deal 50 Market
Opportunities
Strengths 25
• Lower private sector debt position (vs. Bulgaria, Ukraine and Hungary):
0
30% of GDP (BMI, Q1 2011)
• Relatively stable local currency (EUR1=RON4.26 at 17 January 2011;
Human and
RON4.2 average for the last two years. Source: National Bank of Romania) Social Taxation
Environment
Weaknesses
Romania
• Pricing gap between sellers and buyers, particularly visible for those well-
positioned companies that came through the crisis with strong results Investor Eastern Europe
• Scarce (for real estate and start-ups) and expensive leverage for Protection and
Corporate United States = 100 Points
transactions; large percentage of equity required by local banks for new
industries (e.g., renewable energy)
Separate VC and PE Indices
Opportunities
• A significant market, with approximately 22 million people 40
• VC: certain tax incentives for private investors who set up or run SMEs 50
(participation should not exceed 1.25m)
55
Threats
• Low population growth rates will result in a shrinkage of future consumer
60
market size
• Migration of skilled labor force to other European countries
65
• Special remuneration schemes in place to minimize tax
2006 2007 2008 2009 2010 2011
Outlook
• Romanian economy estimated to rebound in 2011 (real GDP projected VC PE VCPE
growth for 2011 is +1.5% according to the National Prognosis Commission
report in November 2010). Recovery process potentially slower than that Comparison within Peer Group
of other EU27 countries 2007 2011 Quartile
• More intense activity on the transactions market in 2011, as the Rank Value Rank 4th 1st
confidence of investors in the economy increases Slovenia 45 46,8 45
• Local M&A market will continue to be sensitive and reactive to economic
and fiscal governmental decisions Estonia 41 44,8 49
Bulgaria 50 44,1 51
Cornelia Bumbacea, Ernst & Young
cornelia.bumbacea@ro.ey.com Croatia 55 43,4 52
Romania 47 41,0 60
Lithuania 46 41,3 57
Slovakia 48 39,1 62
Latvia 56 29,4 67
Ukraine 67 27,8 68
192 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 193
IV. Regional and country profiles
Russian Federation
Capital: Moscow ++ Official Language: Russian ++ Currency: Russian Ruble
Quartile
Entrepr. Cult./Deal Opp. 29 56,7 31
4th 1st
GDP 1509 [bn USD] IPO Volume
Population 142 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
100
Opportunities 27
• Preparations for 2014 Olympics and 2018 World Cup are expected to 29
create a substantial flow of infrastructure opportunities 31
Index Rank
194 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 195
IV. Regional and country profiles
Saudi Arabia
Capital: Riyadh ++ Official Language: Arabic ++ Currency: Saudi Riyal
Quartile
Entrepr. Cult./Deal Opp. 47 60,5 28
4th 1st
GDP 432 [bn USD] IPO Volume
Population 26 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
100
• Over-dependence on oil: shifts in global oil prices are likely to affect Investor Middle East
exports and government revenues Protection and
Corporate United States = 100 Points
• Shortage of marketable skills among nationals and a high unemployment
rate among Saudi citizens, creating private sector dependence on
expatriate labor Separate VC and PE Indices
• Stringent lending criteria and the need by banks to increase provisions for 20
non-performing loans, slowing down credit recovery 22
Opportunities 24
construction and independent water and power plants for local and 30
foreign investors 32
• Saudi Arabia is considering privatization of some state-owned companies, 34
offering great opportunities to investors 36
38
Threats
40
• Any attacks on oil facilities could lead to a disruption of output, which
2006 2007 2008 2009 2010 2011
would be extremely detrimental to the overall economy, given the reliance
on this sector
VC PE VCPE
• Perceptions of high security risk deter some investors and add to the cost
of insurance
Comparison within Peer Group
Outlook
2007 2011 Quartile
• Encouraged by the country’s impressive oil reserves, combined with a positive
Rank Value Rank 4th 1st
outlook for global oil prices, investor sentiment toward the market is
expected to improve over the medium to long term Israel 19 72,2 21
Saudi Arabia 36 67,5 25
Tanuj Paruthi, Ernst & Young
tanuj.paruthi@sa.ey.com United Arab Emirates 33 61,6 28
Kuwait 40 57,9 35
Jordan 42 53,2 38
Oman 51 45,6 46
Bahrain 58 44,3 50
196 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 197
IV. Regional and country profiles
Singapore
Capital: Singapore ++ Official Language: English, Mandarin, Malay, Tamil ++ Currency: Singapore Dollar
Quartile
Entrepr. Cult./Deal Opp. 11 89,2 9
4th 1st
GDP 195 [bn USD] IPO Volume
Population 5 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
125
100
SWOT Analysis Entrepr. Culture
75 Depth of Capital
and Deal
50
Market
Strengths Opportunities
• Corporate perception of VCPE is positive 25
Weaknesses
• Government links with some of the largest local companies, limiting their Separate VC and PE Indices
need for external capital 0
• VC market less robust than the PE market
1
Opportunities
• Certain sectors present consolidation opportunities 2
Index Rank
198 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 199
IV. Regional and country profiles
Slovakia
Capital: Bratislava ++ Official Language: Slovak ++ Currency: Euro
75
SWOT Analysis Entrepr. Culture
Depth of Capital
and Deal 50 Market
Opportunities
Strengths 25
• GDP growth, falling external vulnerability and tight public finances are
0
expected as a result of economic and business-friendly reforms performed
in the past
Human and
• Skilled workforce attracting FDI Social Taxation
• Healthy banking sector able to respond to the financing needs of Environment
enterprises and to provide loans Slovakia
• The introduction of Euro has protected Slovak economy volatile FX rates Investor Eastern Europe
Weaknesses Protection and
Corporate United States = 100 Points
• With its large export-oriented manufacturing sector, the economy is
heavily exposed to foreign demand
• Cost-based competitiveness is no longer sufficient in many industries Separate VC and PE Indices
• Further pursuit of market reforms is less of a priority for the current 40
government
• Dependence on economic development in other countries affected by 45
economic crisis
50
Index Rank
Opportunities
• Privatization of state-owned companies 55
• Market saturation lower than in Western European countries
60
• Increased inflow of EU funds in the financing period 2007-13 is expected
to lead to a substantial flow of investment into infrastructure 65
Threats
70
• As the currencies of Central European peers continue to depreciate against
2006 2007 2008 2009 2010 2011
the euro, the competitiveness of Slovakia’s export-oriented manufacturing
sector will be affected VC PE VCPE
• Export-oriented economy with a significant exposure to the automotive
industry
Comparison within Peer Group
• Substantial dependence on Russia’s gas/oil supplies
• Eurozone entry means loss of exchange rate flexibility and poses a threat 2007 2011 Quartile
to price levels Rank Value Rank 4th 1st
Bulgaria 50 44,1 51
Outlook
• Forecast to be one of the Eurozone countries with the fastest economic Croatia 55 43,4 52
recovery and growth Romania 47 41,0 60
• Growth prospects remain positive, despite the current global turmoil Lithuania 46 41,3 57
• Structural reforms should gradually improve the health of public finance
Slovakia 48 39,1 62
and country prospects
Latvia 56 29,4 67
Jozef Mathia, Ernst & Young
jozef.mathia@sk.ey.com Ukraine 67 27,8 68
Georgia 68 27,2 69
Moldova 71 22,0 72
200 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 201
IV. Regional and country profiles
Slovenia
Capital: Ljubljana ++ Official Language: Slovene ++ Currency: Euro
Opportunities
• Generally underdeveloped VCPE market provides room for new market Separate VC and PE Indices
entrants
• Increased demand for capital injections 40
Threats
Index Rank
46
• Legal and business conditions are not supporting a dynamic SME sector 48
due to complicated licensing and registration processes and investment
barriers 50
Outlook 56
• Small number of transactions, lack of regulatory framework 2006 2007 2008 2009 2010 2011
• Difficulties in accessing traditional bank financing and the lack of
experience in restructuring will drive demand for more VCPE activities VC PE VCPE
• Start-ups exhibiting a dedicated growth and global reach present
undervalued opportunities to GPs Comparison within Peer Group
Balazs Tuske, Ernst & Young 2007 2011 Quartile
balazs.gal@hu.ey.com Rank Value Rank 4th 1st
Poland 35 57,4 36
Czech Republic 34 55,0 37
Turkey 31 52,8 39
Hungary 43 52,0 40
Slovenia 45 46,8 45
Estonia 41 44,8 49
Bulgaria 50 44,1 51
Croatia 55 43,4 52
Romania 47 41,0 60
202 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 203
IV. Regional and country profiles
South Africa
Capital: Pretoria (administrative); CapeTown (legislative); Bloemfontein (judiciary) ++ Official Language: Afrikaans, English and others ++ Currency: Rand
Quartile
Entrepr. Cult./Deal Opp. 27 58,1 29
4th 1st
GDP 327 [bn USD] IPO Volume
Population 50 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
125
100
SWOT Analysis Entrepr. Culture
75 Depth of Capital
and Deal
50
Market
Strengths Opportunities
• Advanced and liquid stock markets 25
• Skills shortage is still high and the education system is still battling to Investor Africa
meet the requirements of the job market Protection and
Corporate United States = 100 Points
Opportunities
• Although growth is not as robust as in the rest of the continent, Separate VC and PE Indices
South Africa remains an important gateway for multinationals investing
17
in Africa, and will continue to benefit from the inflow of FDI, even if
it is destined for other countries 18
19
Threats 20
• Pressure on the Government to create jobs has led to some ambiguity
Index Rank
21
about what policies will be followed, e.g., laws on labor brokers
22
• The nationalization debate remains crucial, and there is no outright 23
direction as to which way it will go
24
• Any dip in the developed economies, or in China’s economic resurgence,
25
might hamper growth of main exports, such as those in the automotive
26
and resources sector
27
Outlook 2007 2008 2009 2010 2011
• Economic growth is expected to come in below African average
• Business confidence is generally up; most of the company reports in VC PE VCPE
the first quarter of 2011 show a positive trend
• There is a major retail industry takeover underway with the general Comparison within Peer Group
backing of the country, although there are some hurdles related to
2007 2011 Quartile
the labor unions
Rank Value Rank 4th 1st
• Major sectors are expected to grow, including the automotive industry where
forecasts are of an 11% growth in sales in 2011 South Africa 24 66,9 26
• Major banks are beginning to see higher rates of credit applications Egypt 52 41,8 55
(some banks reported a 40% increase in credit applications), with Morocco 61 41,8 54
repossession rates at a record low
Tunisia 64 41,5 56
Ajen Sita, Ernst & Young
Kenya 69 38,3 63
ajen.sita@za.ey.com
Nigeria 66 37,1 64
Namibia 70 26,4 70
Algeria 76 17,1 77
204 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 205
IV. Regional and country profiles
Spain
Capital: Madrid ++ Official Language: Spanish ++ Currency: Euro
16
• Growth through expansion into Latin America, where Spanish companies
have historically been successful 18
• High returns achievable by investing at the bottom of the economic cycle 20
Threats 22
• Restructuring of national savings banks, which threatens the Spanish 24
financial system
26
• Increased pessimism toward investment in Spain due to the economic
2006 2007 2008 2009 2010 2011
outlook of the country
• Investment analysis compromised by focus on portfolio management VC PE VCPE
• A prolonged economic downturn could, over time, lead to a loss in
human capital due to migration of talent abroad where there are greater
Comparison within Peer Group
opportunities
2007 2011 Quartile
Outlook Rank Value Rank 4th 1st
• Declining volume of investments/divestments France 17 79,6 14
• Significant labor market reforms to employment law, collective bargaining
and pensions, as well as a fiscal adjustment, will be required to achieve Belgium 18 76,8 15
long-term sustainable growth Austria 23 71,7 22
• PE sector looks set to continue to play an important role in the Spain 20 69,1 23
development of the economy through the management of companies in
Ireland 14 67,7 24
financial difficulty
Portugal 38 60,4 31
Pedro Rodríguez, Ernst & Young
pedro.rodriguezfernandez@es.ey.com Italy 32 59,6 32
Luxembourg 29 59,3 33
Greece 39 47,9 44
206 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 207
IV. Regional and country profiles
Sweden
Capital: Stockholm ++ Official Language: Swedish ++ Currency: Swedish Krona
Outlook
• Sweden remains attractive to both local and overseas investors, and has 6
a mature and sophisticated M&A market
8
David Ramm, Ernst & Young
david.ramm@se.ey.com 10
12
2006 2007 2008 2009 2010 2011
VC PE VCPE
208 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 209
IV. Regional and country profiles
Switzerland
Capital: Bern ++ Official Language: German, French, Italian, Romansh ++ Currency: Swiss Franc
Opportunities 1
• Presence of major multinationals leads to spin-off opportunities 2
(especially in chemicals and consumer goods) 3
Index Rank
Outlook 8
• The positive short-term outlook and the increased focus on Switzerland as 9
a “deal country” will foster the excellent current position 2006 2007 2008 2009 2010 2011
210 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 211
IV. Regional and country profiles
Taiwan
Capital: Taipei ++ Official Language: Standard Mandarin Chinese ++ Currency: New Taiwan Dollar
Quartile
Entrepr. Cult./Deal Opp. 56 36,7 56
4th 1st
GDP 418 [bn USD] IPO Volume
Population 23 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
125
100
SWOT Analysis Entrepr. Culture
75 Depth of Capital
and Deal
50
Market
Strengths Opportunities
• Global leader in high-tech manufacturing 25
212 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 213
IV. Regional and country profiles
Thailand
Capital: Bangkok ++ Official Language: Thai ++ Currency: Baht
Quartile
Entrepr. Cult./Deal Opp. 38 47,7 43
4th 1st
GDP 298 [bn USD] IPO Volume
Population 65 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
100
market 30
• Corporate valuation is one of the lowest in the region despite substantial 31
growth and a well-performing economy. This creates a significant 32
valuation gap 33
34
Threats
35
• The situation for natural resources is declining
2006 2007 2008 2009 2010 2011
• Market perception of corruption and uncertain regulatory regimes
• Worsening economic situation in US and Europe creates downward VC PE VCPE
pressure on the value of the currency, reducing the competitiveness
of the export market and adversely affecting the foreign investment
Comparison within Peer Group
environment
• Concerns about the political environment impact the confidence of both 2007 2011 Quartile
consumers and investors Rank Value Rank 4th 1st
214 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 215
IV. Regional and country profiles
Tunisia
Capital: Tunis ++ Official Language: Arabic ++ Currency: Tunisian Dinar
Quartile
Entrepr. Cult./Deal Opp. 46 44,6 48
4th 1st
GDP 41 [bn USD] IPO Volume
Population 10 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
100
government
60
Outlook
65
• Moderate growth economy
• With the improving protection of property rights having been Tunisia’s 70
strength, investors will want to see a conclusion to the political standoff
before committing to Tunisia 75
• The stock market is reasonably liquid and corporate activity has been on 2007 2008 2009 2010 2011
an upward trajectory over the past 24 months
VC PE VCPE
Abdulaziz Al-Sowailim, Ernst & Young
abdulaziz.al-sowailim@sa.ey.com
Comparison within Peer Group
2007 2011 Quartile
Rank Value Rank 4th 1st
South Africa 24 66,9 26
Egypt 52 41,8 55
Morocco 61 41,8 54
Tunisia 64 41,5 56
Kenya 69 38,3 63
Nigeria 66 37,1 64
Namibia 70 26,4 70
Algeria 76 17,1 77
216 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 217
IV. Regional and country profiles
Turkey
Capital: Ankara ++ Official Language: Turkish ++ Currency: Turkish Lira
2011
• There is a growing appetite for acquisition finance, supported by a local 36
banking system that is healthy and liquid
38
• IPO and M&A activity is increasing, as the economy grows; regulators are
offering substantial incentives, such as lowering the minimum percentage 40
float and profitability requirements, and the introduction of secondary
markets for companies that cannot meet the listing requirements 42
• The majority of businesses are small- to medium-sized and family owned, 2006 2007 2008 2009 2010 2011
with family members still active in daily management
VC PE VCPE
Outlook
• Turkey is a high potential growth market
Comparison within Peer Group
• The legal and regulatory framework is still converging to the EU system
2007 2011 Quartile
Demet Ozdemir, Ernst Young Rank Value Rank 4th 1st
demet.ozdemir@tr.ey.com Poland 35 57,4 36
Czech Republic 34 55,0 37
Turkey 31 52,8 39
Hungary 43 52,0 40
Slovenia 45 46,8 45
Estonia 41 44,8 49
Bulgaria 50 44,1 51
Croatia 55 43,4 52
Romania 47 41,0 60
218 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 219
IV. Regional and country profiles
Ukraine
Capital: Kyiv ++ Official Language: Ukrainian ++ Currency: Hryvnia
75
SWOT Analysis Entrepr. Culture
Depth of Capital
and Deal 50 Market
Opportunities
Strengths 25
• Improved relations with Moscow, which has positively impacted Ukraine’s
0
political risk profile and resulted in short-term stability
• Extension of a US$15.2b emergency stand-by agreement from the IMF
Human and
significantly reduced the likelihood of a sovereign credit default Social Taxation
• Advantageous geographic location means great potential as a Environment
transportation and agricultural hub Ukraine
60
• The investment environment is improving, as the country moves toward
market liberalization, cutting back on regulation and removing numerous 62
licensing requirements 64
• The new tax code is expected to bring cuts in income and VAT tax rates
66
between 2011 and 2014, and reduces the complexity and burden of tax
compliance 68
Threats VC PE VCPE
• The new tax code may reinforce the use of tax optimization schemes by
Ukrainian entities
Comparison within Peer Group
• Ukraine’s legal system continues to receive a high level of criticism
from investors for its inefficiency, frequent delays and common political 2007 2011 Quartile
interference Rank Value Rank 4th 1st
Romania 47 41,0 60
Outlook
• Ukraine’s economy is expected to underperform its peers due to its Lithuania 46 41,3 57
overleveraged banking system, high levels of external debt, weak public Slovakia 48 39,1 62
finances and poor demographics Latvia 56 29,4 67
• Relatively cheap assets have significant potential for future growth
Ukraine 67 27,8 68
Vitalii Kuzub, Ernst & Young Georgia 68 27,2 69
vitalii.kuzub@ua.ey.com
Moldova 71 22,0 72
Aaron Johnson, Ernst & Young
Macedonia 75 19,3 73
aaron.johnson@ua.ey.com
Albania 79 17,8 75
220 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 221
IV. Regional and country profiles
Quartile
Entrepr. Cult./Deal Opp. 59 47,7 42
4th 1st
GDP 245 [bn USD] IPO Volume
Population 5 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
100
30
Opportunities
32
• Investment is encouraged by the Government through low taxation,
import duties and other incentives, thereby strengthening the country’s 34
Threats
Comparison within Peer Group
• Heavy subsidies on utilities and agriculture, combined with an outdated
tax system, have contributed to persistent fiscal deficits in the past 2007 2011 Quartile
• Several high-profile construction projects have been delayed and the Rank Value Rank 4th 1st
property market crash could threaten future development Israel 19 72,2 21
Outlook Saudi Arabia 36 67,5 25
• Ongoing declines in real estate prices and a continuing weak outlook United Arab Emirates 33 61,6 28
for domestic demand (particularly in Dubai) underpin the view that core
Kuwait 40 57,9 35
inflationary pressures will be relatively muted over the coming year
Jordan 42 53,2 38
Azhar Zafar, Ernst & Young
azhar.zafar@ae.ey.com Oman 51 45,6 46
Bahrain 58 44,3 50
222 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 223
IV. Regional and country profiles
United Kingdom
Capital: London ++ Official Language: English ++ Currency: Pound Sterling
Opportunities 2
Index Rank
224 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
11.Economic Activity
Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social Environment
Social Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 225
IV. Regional and country profiles
Quartile
Entrepr. Cult./Deal Opp. 1 100,0 2
4th 1st
GDP 14802 [bn USD] IPO Volume
Population 309 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
125
• Economic recovery not strong enough to show effects on unemployment Investor North America
• Fragile recovery of domestic demand with individuals threatened by falling Protection and
Corporate United States = 100 Points
house prices and high unemployment
• High individual debt and possible further deleverage of individual
households Separate VC and PE Indices
• Continuous decrease in the number of VC funds 0
• Decline of VC-backed IPOs
Opportunities
• Robust innovation and fast growth can be seen in segments such as 1
Index Rank
226 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 227
IV. Regional and country profiles
Uruguay
Capital: Montevideo ++ Official Language: Spanish ++ Currency: Peso Uruguayo
Quartile
Entrepr. Cult./Deal Opp. 52 44,7 47
4th 1st
GDP 40 [bn USD] IPO Volume
Population 3 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
100
Opportunities 68
• Inward investments have simple registration rules, no reserve required and
69
no exchange controls
2006 2007 2008 2009 2010 2011
• Improvement has been seen in the judicial system
• Public and private efforts have been made to promote entrepreneurial VC PE VCPE
activity and start-ups
Outlook Comparison within Peer Group
• The VCPE activity will likely decelerate during 2011
2007 2011 Quartile
• The country could make its VCPE business environment more attractive by
Rank Value Rank 4th 1st
adopting a better legal framework for nationally domiciled fund formation
and operation, and reducing restrictions on institutional investors Chile 30 61,5 29
Brazil 57 48,7 43
Jose Ricardo Villarmarzo, Ernst & Young
ricardo.villarmarzo@uy.ey.com Mexico 44 48,7 42
Colombia 49 45,3 47
Peru 63 41,1 59
Uruguay 65 36,8 65
Argentina 60 36,4 66
Ecuador 74 17,9 74
Paraguay 80 15,7 78
228 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 229
IV. Regional and country profiles
Venezuela
Capital: Caracas ++ Official Language: Spanish ++ Currency: Bolívar Fuerte
Quartile
Entrepr. Cult./Deal Opp. 72 15,5 73
4th 1st
GDP 301 [bn USD] IPO Volume
Population 29 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
100
• Sharp fall of foreign investment over recent years Investor Latin America
• High levels of corruption, crime, bureaucracy and a politically driven Protection and
Corporate United States = 100 Points
judicial environment
• Currency devaluation trend and complex foreign exchange regulation that
significantly limits FX access Separate VC and PE Indices
• Low investor protection and governance structure 70
Threats 71
• GDP contraction for two consecutive years and a negative outlook for 72
230 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 231
IV. Regional and country profiles
Vietnam
Capital: Hanoi ++ Official Language: Vietnamese ++ Currency: Dồng
Quartile
Entrepr. Cult./Deal Opp. 60 34,7 58
4th 1st
GDP 103 [bn USD] IPO Volume
Population 89 [mn] M&A Volume
GDP Growth '04 '10 VC Activity Key Factors Performance
Pop. Growth '04 '10 PE Activity
Economic
Activity
100
• Political stability
• Strong entrepreneurial culture Human and
Social Taxation
• Strong and growing domestic demand Environment
Weaknesses
Vietnam Asia
• VC nascent working population, lacking practical experience in various Investor
sectors Protection and
Corporate United States = 100 Points
• Administrative procedures still lagging behind regional peers
• Underdeveloped financial markets
• Relatively weak corporate governance Separate VC and PE Indices
• Financial reporting not yet in line with international standards 50
Opportunities 52
• Exports to the US, China and ASEAN bloc are growing, along with 58
232 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Details
1 Economic Activity
1. Economic Activity
2007 2011 Quartile
Rank Value Rank 4th 1st
33.Taxation
Taxation
2007 2011 Quartile
Rank Value Rank 4th 1st
44.Investor
Investor Protection andCorporate
Protection and CorporateGovernance
Governance
2007 2011 Quartile
Rank Value Rank 4th 1st
55.Human
Human and
and Social
Social Environment
Environment
2007 2011 Quartile
Rank Value Rank 4th 1st
66.Entrepreneurial Cultureand
Entrepreneurial Culture andOpportunities
Deal Opportunities
2007 2011 Quartile
Rank Value Rank 4th 1st
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 233
V. Appendices
Methodology, technical descriptions,
limitations, data descriptions,
data sources and references
234 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 235
V. Appendices
Normalization Aggregation
In order to make the cross-sectional data series comparable, the For the index-score calculation, we use geometric aggregation
raw data has to be converted into a common range. The rescaling because it is better suited than arithmetic aggregation. Geome-
method is used to normalize indicators to such a range by linear tric aggregation rewards those countries or those sub-indicators
transformation. Thereby, 100 represents the best score, while 1 with higher scores. Overall, a shortcoming in the value of one
the worst. variable or sub-index can be compensated by a surplus in ano-
For every individual variable, we define whether high values ther. Compensability is constant in linear aggregation, while it is
influence the attractiveness for investors positively or negatively, smaller in geometric aggregation for the sub-indicators with low
and hence, assign 100 points either to the highest score (e.g., in values. Therefore, countries with low scores in some sub-indices
case of the GDP per capita) or to the lowest (e.g., in case of high would benefit from linear aggregation.
hiring costs). For this reason, we use geometric aggregation as follows.
The sub-item points for every country are calculated accor-
ding to the following formula:
236 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Weighting
After calculating the performance scores for each data series on
the lowest level, the scores are aggregated using the aforemen-
tioned aggregation method. On the lowest level, items are aggre-
gated with equal weights, i.e., the weights are derived from the
number of components that are aggregated.
The following Exhibit shows the aggregation path from the
normalized and deflated (raw) data series to the final VCPE
Country Attractiveness Index score.
3/22
Economic
Activity
7/22
Capital
Markets
VPC Index
Score
1/22
Taxation
3/22
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 237
V. Appendices
VC/PE index
0.8336 - -
2011
VC index
- 0.8242 -
2011
PE index
- - 0.8347
2011
238 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 239
V. Appendices
240 The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual
Indicators Dimension Positive/ VC PE Explanation Source
for index negative
calculation impact
2.4 M&A market activity
2.4.1 M&A market [LN USDm] + X X The data comprise M&A ranking value including net debt of target. Thomson One Banker
volume According to Thomson, the ranking value is calculated as follows:
RANKVAL = the sum of VALNOLIA, straight debt, short-term debt and
preferred equity, minus cash.
VALNOLIA: transaction value excluding liabilities assumed;
transaction value minus the value of any liabilities agreed to be
assumed in the transaction.
2.4.2 Number of M&A [LN number] + X X Number of M&A deals in a country. Thomson One Banker
deals
2.5 Debt and credit market
2.5.1 Domestic credit [% of GDP] + - X Domestic credit provided by the banking sector includes all credit to World Bank (World
provided by various sectors on a gross basis, with the exception of credit to the Development Indicator)
banking sector central government, which is net. The banking sector includes
monetary authorities and deposit money banks, as well as other
banking institutions where data are available (including institutions
that do not accept transferable deposits but do incur such liabilities
as time and savings deposits). Examples of other banking institutions
are savings and mortgage loan institutions and building and loan
associations.
2.5.2 Ease of access to [-] + - X This data series measures the perceived simplicity of obtaining a bank World Economic Forum
loans loan in a country with only a good business plan and no collateral.
2.5.3 Credit information [-] + - X The depth of credit information index measures rules affecting the World Bank, Doing
index scope, accessibility and quality of credit information available Business
through either public or private credit registries. The index ranges
from 0 to 6, with higher values indicating the availability of more
credit information, from either a public registry or a private bureau,
to facilitate lending decisions. If the registry is not operational or has
coverage of less than 0.1% of the adult population, the score on the
depth of credit information index is 0.
2.5.4 Interest rate [%] - - X Interest rate spread is the interest rate charged by banks on loans to World Economic Forum;
spread prime customers minus the interest rate paid by commercial or World Development
similar banks for demand, time, or savings deposits. Indicators
2.6 Bank non- [%] - - X Bank non-performing loans to total gross loans are the value of World Bank (World
performing loans non-performing loans divided by the total value of the loan Development Indicator)
to total gross portfolio (including non-performing loans before the deduction of
loans specific loan-loss provisions). The loan amount recorded as
non-performing should be the gross value of the loan as recorded
on the balance sheet, not just the amount that is overdue.
2.7 Financial market [-] + - X This data series measures the perceived level of sophistication of World Economic Forum
sophistication financial markets in a country. The index ranges 1 to 7, with higher
values indicating that financial market sophistication is excellent by
international standards and low values indicating that it is poor by
international standards.
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4.2.2 Property rights [-] + X X Property rights is an assessment of the ability of individual to Fraser Institute
accumulate private property, secured by clear laws that are fully
enforced by the state. The index ranges from 1 to 10, with higher
values indicating higher protection of property rights.
4.2.3 Intellectual [-] + X X This data series measures the perceived “intellectual property World Economic Forum
property protection” in a country. The index ranges from 1 to 7, with higher (Executive Opinion Survey
protection values indicating that Intellectual property protection and 2007, 2008)
anti-counterfeiting measures in a country are strong and enforced
whereas low values indicate the opposite.
4.3 Quality of legal enforcement
4.3.1 Judicial [-] + X X This data series measures the perceived judicial independence in a World Economic Forum
independence country. The index ranges from 1 to 7, with higher values indicating (Global Competitiveness
that the judiciary in a country is independent from political Report)
influences of members of government, citizens, or firms and lower
values indicating that it is heavily influenced.
4.3.2 Impartial courts [-] + X X This data series measures the perceived quality of the legal Fraser Institute
framework in a country. The index ranges from 0 to 10, with higher
values indicating that the framework in a country for private
businesses to settle disputes and challenge the legality of
government actions and/or regulations follows a clear, neutral
process. Lower values indicate that the framework seems to be
inefficient and subject to manipulation.
4.3.3 Integrity of the [-] + X X This component is based on two sub-components. Each sub- Fraser Institute, PRS Group
legal system component equals half of the total. The “law” sub-component (International Country
assesses the strength and impartiality of the legal system, and the Risk Guide)
“order” sub-component assesses popular observance of the law. The
index ranges from 0 to 10. High rating values indicate a sound legal
system.
4.3.4 Rule of law [-] + X X Rule of law measures the extent to which agents have confidence in World Bank (Worldwide
and abide by the rules of society, in particular the quality of contract Governance Indicator)
enforcement, the police, and the courts, as well as the likelihood of
crime and violence. The index ranges from -2.5 to 2.5 with higher
values corresponding to better governance outcomes.
4.3.5 Regulatory quality [-] + X X Regulatory quality measures the ability of the government to World Bank (Worldwide
formulate and implement sound policies and regulations that permit Governance Indicator)
and promote private sector development. The index ranges from -2.5
to 2.5 with higher values corresponding to better governance
outcomes.
5 Human and social environment
5.1 Education and human capital
5.1.1 Quality of the [-] + X - This data series measures the perceived quality of the educational World Economic Forum
educational system in a country. The index ranges from 1 to 7, with higher values
system indicating that the educational system in a country meets the needs
of a competitive economy. Low values indicate that the system does
not meet the needs of a competitive economy.
5.1.2 Quality of [-] + X - This data series measures the perceived quality of scientific research World Economic Forum
scientific research institutions in a country. The index ranges from 1 to 7, with higher
institutions values indicating that Scientific research institutions in a country
(e.g., university laboratories, government laboratories) are the best in
their fields internationally. Low values indicate that they are not
competitive or non-existent.
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5.3 Bribery and corruption
5.3.1 Bribery and [-] + X X This index describes the overall extent of corruption (frequency and/ Transparency International
corruption index or size of bribes) in the public and political sectors. The index ranges
from 0 to 10. Countries where bribery and corruption cases are
frequent receive a low rating score.
5.3.2 Control of [-] + X X This data series measures the perception of the extent to which World Bank (Worldwide
corruption public power is exercised for private gain, including both petty and Governance Indicator)
grand forms of corruption, as well as "capture" of the state by elites
and private interests. Countries in which seemingly public power is
frequently used for private gain a low rating score. The index ranges
from -2.5 to 2.5 with higher values corresponding to better
governance outcomes.
5.3.3 Extra payments/ [-] + X X This index measures the frequency of extra payments and bribes Fraser Institute
bribes firms pay in a country. The index ranges from 0 to 10 with higher
values corresponding to better governance outcomes. Countries
where these payments are frequent receive a low rating score.
6 Entrepreneurial culture and deal opportunities
6.1 Innovation
6.1.1 General [-] + X - The framework groups the eight pillars of innovation into two INSEAD
innovativeness categories: inputs and outputs. The five input pillars – institutions
index and policies, human capacity, infrastructure, technological
sophistication and business markets and capital – represent aspects
which enhance the capacity of a nation to generate ideas and
leverage them for innovative products and services. The three output
pillars – knowledge, competitiveness and wealth – represent the
ultimate benefits of innovation for a nation — more knowledge
creation, increased competitiveness and greater wealth generation.
Each pillar of the GII model is measured by a number of quantitative
and qualitative variables. The averaged scores for the input and
output pillars together give an overall score — the GII. The values of
each variable for the country are scaled on a range of 1 to 7.
6.1.2 Capacity for [-] + X - This index measures the perceived capacity for innovation in a World Economic Forum
innovation country. The index ranges from 1 to 7 with higher values indicating
that companies obtain technology by conducting formal research
and pioneering their own new products and processes. Low values
indicate that companies obtain technology exclusively from licensing
or imitating foreign companies.
6.2 Scientific and [LN number] + X - The data series scientific and technical journal articles refer to the World Bank (World
technical journal number of scientific and engineering articles published in the Development Indicator)
articles following fields: physics, biology, chemistry, mathematics, clinical
medicine, biomedical research, engineering and technology, and
earth.
6.3 Ease of starting and running a business
6.3.1 Number of [#] - X - This data series provides the average number of administrative World Bank (Doing
procedures to procedures necessary to start a business in a country. Business)
start of business
A procedure is defined as any interaction of the company founder
with external parties (for example, government agencies, lawyers,
auditors or notaries). Interactions between company founders or
company officers and employees are not counted as procedures. Only
procedures required of all businesses are covered. Industry-specific
procedures are excluded. For example, procedures to comply with
environmental regulations are included only when they apply to all
businesses conducting general commercial or industrial activities.
Procedures that the company undergoes to connect to electricity,
water, gas and waste disposal services are not included.
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6.4.3 Recovery rate [Cents on USD] + X - The recovery rate is recorded as cents on the dollar recouped by World Bank (Doing
creditors through the bankruptcy or insolvency proceedings. The Business)
calculation takes into account whether the business emerges from
the proceedings as a going concern as well as costs and the loss in
value due to the time spent closing down. If the business keeps
operating, no value is lost on the initial claim, set at 100 cents on the
dollar. If it does not, the initial 100 cents on the dollar are reduced to
70 cents on the dollar. Then the official costs of the insolvency
procedure are deducted (one cent for each percentage of the initial
value). Finally, the value lost as a result of the time the money
remains tied up in insolvency proceedings is taken into account,
including the loss of value due to depreciation of the hotel furniture.
Consistent with international accounting practice, the depreciation
rate for furniture is taken to be 20%. The furniture is assumed to
account for a quarter of the total value of assets. The recovery rate is
the present value of the remaining proceeds, based on end-2006
lending rates from the IMF’s International Financial Statistics,
supplemented with data from central banks.
6.5 Corporate R&D
6.5.1 Company [-] + X X This index measures the company spending on R&D in a country. The World Economic Forum
spending on R&D index ranges from 1 to 7 with higher values indicating that
companies in a country spend heavily on research and development
relative to international peers. Low values indicate that companies do
not spend money on research and development.
6.5.2 Utility patents [LN Number] + X X This data series provides the number of utility patents (i.e., patents World Economic Forum
for invention) granted between 1 January and 31 December 2007,
per million population.
Correlation data
Venture capital LN [USDm] X Amount of venture capital investments in a country per year. The Thomson One
investments country is defined by fund location. Thomson Reuters uses the term
to describe the universe of venture investing. It does not include
buyout investing, mezzanine investing, fund of fund investing,
secondaries, etc.
Private equity LN [USDm] X Amount of private equity investments in a country per year. The Thomson One
investments country is defined by fund location. Thomson Reuters uses the term
to describe the universe of private equity investing. It does include
buyout investing, mezzanine investing, fund of fund investing,
secondaries, etc.
Venture capital LN [USDm] X X The sum of venture capital and private equity investments in a Thomson One
and private equity country per year.
investments
The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 247
V. Appendices
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The Global Venture Capital and Private Equity Country Attractiveness Index - 2011 annual 249
The Global Venture Capital and Private
Equity Country Attractiveness Index
2011 annual
This report presents the results of a comprehensive research project on how to
measure the attractiveness of a country for equity capital investors. Designed
to be an index produced annually, it is a dynamic product.
An online version that uses the most recent data and allows for country
comparisons can be found at http://blog.iese.edu/vcpeindex/
Ernst & Young are delighted to be associated with the report and hope that the
information is unique in supporting PE and VC houses with equity investment
decisions and governments on what needs to be done to attract international
risk capital.