Innovation
Venture Capital (Early Stage)
Description: This indicator presents the reported number of early-stage venture capital deals and the associated dollar value. Venture capitalists invest in firms that have a high potential for growth but are not ready to do an initial public offering of stock. The investments tend to be both high risk and high return. Capital investments may be monitored by stage of the development of the business enterprise: start-up (seed), early, expansion, and later. In the early stage of development, the concept is in testing or is in the preliminary stages of production. It is not unusual to be able to invest in the firm before an established revenue stream is available. Enterprises receiving early-stage funding have typically been in business less than three years.
The data are inflation adjusted using the gross domestic product (GDP) implicit price deflator. The inflation-adjusted dollars are expressed in terms of the latest year of data available.
Rationale: Venture capital activity can be used to measure the number of potentially high-growth firms being started. These typically are innovative high-technology firms, such as biotechnology enterprises.
Data Sources: PricewaterhouseCoopers/National Venture Capital Association MoneyTree(tm) Report https://www.pwcmoneytree.com/MTPublic/ns/index.jsp. Click on ‘Historical Trend Data’ then specify the state and stage at the bottom. The GDP implicit price deflator is available from the U.S. Department of Commerce, Bureau of Economic Analysis http://www.bea.gov/national/nipaweb/SelectTable.asp?Selected=Y (Table 1.1.9).
Comments on the Quality of the Data: Nationally, the availability of venture capital is cyclical. Annual dollar values are volatile for Arizona. Wide swings in dollar value can result from a single large deal. The data are based on publicly reported deals and may not be representative of total venture capital invested.
