Update on work to
Improve data on access to finance
for entrepreneurship
OECD Entrepreneurship Indicators
Steering Group (EISG) meeting
Istanbul, 25-26 June 2007
Eric Gonnard, Statistics Directorate, OECD
1
OECD “Access to finance” works
The EIP work on data on access to finance for
entrepreneurship responds to four projects:
1. The ICE Project on Risk Capital
2. The WPSMEE Study on Financing High Growth and
Innovative SMEs (HGSME)
3. The EC (joint DG-ENT and Eurostat) work on financing
SMEs
4. The Entrepreneurship Indicators Project
2
SME population target by project (date of issuance)
Entrepreneurship Indicators Project
(Preliminary measurement manual end 2007)
- All SMEs
- Access to financing is one of the determinants for
entrepreneurship (with education, R&D, taxation…)
EC work on access to finance (mid-2010)
- All SMEs
- Debt and equity financing
WPSMEE study
(2nd half 2008)
- Innovative, HG SME
- Debt & Equity financing
- >10 employees, >3y old
Risk Capital project
(spring 2008)
- SMEs seeking Equity
finance
- Equity financing
3
Financing matrix by type of firm,an overall picture
Debt
Supply
Equity
Demand
Firms
Nascent
Stage
Pre-Seed
and Seed Phases
High Growth
Gazelles
Innovative
Start-Up
Start-up
Phase
Growth
Phase
High Growth
Phase
Venture Capital
X
X
Retained earnings
X
X
Angel Investors
X
X
X
Corporate
X
X
X
Export credit
X
X
Commercial Credit
X
X
X
Family/Friends
X
X
Employees
X
X
Founder(s)
X
X
Bank loans
X
X
Factoring
X
X
Govt-backed Credit
X
X
leasing
X
X
Tax credit
X
Personal Credit
X
X
Family/Friends
X
X
4
1. ICE risk capital project: overview

Investigate risk capital market with two main objectives:
– overview of the risk capital market in each country;
– better understand the financing gaps between supply
and demand

Policy track handle by FORA: mapping of policy and
policy's performance;

Data track handle by the OECD: glossary of definitions
and assessment of data sources;

Result in spring 2008 in the “ICE Risk Capital policy and
data handbook”.
5
Risk capital Project: policy study


Pilot study done in the Netherlands in March 2007;
Mapping of policies and policies’ performance
analysis based on the FORA Investment Policy
Model;

Preliminary outputs:
– Investors are concentrated on buy-out segment,
lack of early stage segment skilled investors;
– policy instruments should suit the market stage
(kick-start, developing, re-vitalizing)

Pilot used as a template for other countries.
6
Risk capital Project: data track objectives
This data work will assist the policy evaluations in
identifying precisely where policy interventions are
required and assessing their effectiveness.

Collect and document existing definitions on risk
capital and propose compromised definitions;

Identify and document sources of data on risk capital;

Propose a collection of comparable data on risk
capital.
7
Risk capital Project: data track status (1/2)

Inventory of the data sources and definitions collection
largely completed
- On the supply side from Venture Capital industry
Informal investors and Governmental sources
- On the demand side from SME surveys conducted

First outputs on the definitions:
– differences exists but more related to wordings rather
than substance,
– need to redefine some key terms from a statistical point
of view (e.g. start-up)
8
Risk capital Project: data track status (2/2)





First outputs on the data sources: common practices
but main differences reside in the dissemination:
level of details published;
updates in historical time series not documented;
concepts used :
– valuation at book value or fair value
– valuation when deals committed or paid in cash
– reports based on “office” or “market” approach
other issues (data volatility in growth/drop periods,
timing of the data collection,...).
9
Illustration of office and market approaches
Country A
Investor-X
HQ office
A
A
Country B
A
A
B
B
Investor-X
local
office
B
B
Investment flow
Investments allocated to country A or B with the office approach
Investments allocated to country A or B with the market approach
10
Illustration of deals valuation:
USA Venture Capital funds raised
VentureOne E&Y
Commitments valuation
NVCA Thomson
Paid in cash valuation
(M$)
120 000
Paid in cash >
Commitments in bullish
market
100 000
80 000
60 000
40 000
20 000
0
2000
2001
2002
2003
2004
2005
2006
11
Illustration of growth/drop period issues:
USA Venture Capital investment
VentureOne
E&Y
PWC MoneyTree
Thomson
(M$)
120 000
100 000
Higher differences in
periods of market
volatility
80 000
60 000
40 000
20 000
0
2000
2001
2002
2003
2004
2005
2006
12
Illustration of mixed issues:
UK Private Equity investment
(M€)
Souce: BVCA
Source: EVCA
30 000
Difference:
mix of reasons, in which BVCA
valuation at investment cost,
EVCA at fair value, timing...
25 000
Difference:
EVCA population survey= BVCA
members + other sources of PE
finance
20 000
15 000
10 000
5 000
0
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
13
2. The WPSMEE Study on Financing High
Growth and Innovative SMEs




Study is a module of the 2007/08 program of work on
High Growth SMEs, innovation, intellectual assets and
value creation;
Objectives: improve the availability of comparable data
on financing and contribute to policy development;
Method: use of various sources of data (Community
Innovation Survey, BACH,..) and a policy questionnaire
built on ICE’s model;
Results published in synthesis report.
14
3.The European institutions work on
financing SMEs (1/2)

Eurostat, ECB, European Commission (DG ENTR and
DG ECFIN) and the OECD met in may-07 with
objectives to:
- examine the interest of the diverse organizations
present into “access to finance”;
- set up an overall strategy on sharing statistics
already existing;
- assess the opportunities and constraints for a data
collection
15
3.The European institutions work on
financing SMEs (2/2)

On the demand side, identification of several target
populations, and drafting of three indicators:
–
–
–


Percentage of external financing of young firms
Number of financing applications and reject rates
Cost of debt instruments
The usage and share of best practices of SME’s survey
with other organizations in order to achieve international
comparability;
Eurostat present the possibilities and constraints of
conducting a new survey, three years will be necessary
between this first meeting to the data dissemination.
16
Question to the group:
10 indicators on access to finance for entrepreneurship
Debt
Supply
Equity
Demand
Firms
Nascent
Stage
Pre-Seed
and Seed Phases
High Growth
Gazelles
Innovative
Start-Up
Start-up
Phase
Growth
Phase
High Growth
Phase
Venture Capital
X
X
Retained earnings
X
X
Angel Investors
X
X
X
Corporate
X
X
X
Export credit
X
X
Commercial Credit
X
X
X
Family/Friends
X
X
Employees
X
X
Founder(s)
X
X
Bank loans
X
X
Factoring
X
X
Govt-backed Credit
X
X
leasing
X
X
Tax credit
X
Personal Credit
X
X
Family/Friends
X
X
17