Paolo Mauro

@paolomauroecon.bsky.social

Director, Development Impact Measurement, International Finance Corporation. Author, “The State and Your Hard-Earned Money”

@voxeu.orgReposted by @paolomauroecon.bsky.social

S Reyes Ortega, K Freeman, P Hernando-Kaminsky, J Huber, & @paolomauroecon.bsky.social use data from 150 economies to study how venture capital financing differs across countries. Most of the cross-country gap is associated with how many startups enter the pipeline rather than their funding.

This figure compares the average sectoral distribution of VC volume within countries across high-income and low- and middle-income countries over 2012–2023. For each income group, the figure reports the average share of total VC volume accounted for by each selected sector, weighted by country GDP. The first three sectors—IT, Services–R&D, and Manufacturing–Chemicals and Pharmaceuticals—are sectors in which the average VC share is higher in high-income countries, whereas the remaining three sectors—Wholesale and Retail, Financial Services, and Transportation and Logistics—are sectors in which the average VC share is higher in low- and middle-income countries. Existing views on what venture capital finances and how its markets are structured are primarily shaped by the experience of the US and a few other high-income economies. This column presents evidence covering nearly 270,000 venture capital-backed startups in over 150 economies to provide a more complete picture. Venture capital markets differ across countries in size and also in kind. At lower levels of economic development, the composition tilts away from knowledge intangibles towards organisational intangibles. Yet differences in what venture capital finances tell only part of the story. Most of the cross-country gap in venture capital activity is associated with how many startups enter the funding pipeline rather than how much each raises.