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Austria: Venture Capital Market is Underdeveloped

Published: October 11, 2013; 16:55 · (Vindobona)

According to the Austrian Institute of Economic Research (WIFO), more funds for start-up enterprises would help boosting the economy.

Austria: Venture Capital Market is Underdeveloped / Picture: © Vindobona.org

WIFO criticizes that Austrian start-up companies do not receive sufficient financial resources. Economists at WIFO underlines that venture capital is no conventional investment, but potential earnings are very high.

WIFO thinks that the innovation potential is remarkable. Moreover, the underdevelopment of the venture capital market costs economic growth and jobs, WIFO adds. “In Austria, venture capital only comes at 0.04% of the GDP. This is substantially lower than in other countries. In Denmark and the Netherlands the ratio comes at 0.09% of GDP. In Germany, venture capital reaches 0.06% of GDP.”

WIFO adds that the legal and economic frame conditions are the key factors for venture capital. The main factors are the structure of the industrial sector, the level of bureaucracy, the intensity of regulations and the dynamics of the corporate sector. In all categories, Austria has a satisfying performance. As a result, the provision of venture capital is significantly below its potential, WIFO explains.

Compared to other countries, Austria has to catch-up significantly. The Austrian association of creditors even recommends Austrian companies to boost investments in the CESEE region.

“However, only enterprises with conservative business strategies receive enough funds. In the riskier start-up segment, there are almost no financing opportunities.” WIFO concludes.