While the 2016 Venture Capital and Private Equity Country Attractiveness Index has just been released, Alexander Groh agreed to comment for knowledge@emlyon the major changes taking place in the ranking.


How came the idea of an investment attractiveness index?

One universal trait of global markets is that they are constantly fluctuating, and changes in legislation and financial climate can dramatically change a country’s standing – just look at the effect of the Brexit so far. In 2006, no tool existed which analysed the factors that create a country’s economy for potential venture capitalists or those investing private equity. We created an annual study to measure just this, and to compare trends to showcase markets’ performances.

So, can you give us a bit of background on the study?

This is the seventh year of the global ‘Venture Capital and Private Equity Country Attractiveness Index’, in which we calculate – and rank – the world’s most attractive destinations for investment in venture capital and private equity. The study, which started off in 2006 as a European project, has become a valuable tool for international investors, who wish to compare 125 economies around the globe. It is continually expanding and last year, we added five new countries: Sri Lanka, Qatar, Lebanon, Bolivia and Azerbaijan. Although we are aware that the stage of development in these and many other of the covered emerging markets is not yet sufficiently mature to support VC or PE transactions, we expect improvements in the future. We have therefore started tracking these economies and our index illustrates the progress of their investment conditions.

What are the main drivers for assessing attractiveness in VC/PE assets?

I would say that the main drivers include:

  1. Economic activity, including GDP and expected GDP growth
  2. Depth of capital markets, including IPO activity and financial market sophistication
  3. Taxation, including incentives for entrepreneurs and the ease of filing
  4. Investor protections and corporate governance, including legal protections
  5. Human and social environment, including education, labour regulations and corruption measures
  6. Entrepreneurial culture and deal opportunities, including indicators of innovation, corporate R&D and the ease of starting, running and closing a business

Are there any interesting trends you have discovered?

Yes – but it isn’t advisable to read too much into year-on-year shifts due to the short-term nature of some of the indicators. What I find is much more insightful are the movements we see over periods of five years. For example, a dramatic increase in economic activity has catapulted the Philippines 20 places up to 42nd, and Latvia up 15 places to 29th.

On the other end of the spectrum, of course, there are countries that have fallen sharply down the rankings, such as Cyprus (down 29 spots to 67th), Tunisia (down 16 places to 54th), and Brazil, Egypt and Syria (which all fell 13 spots to 54th, 70th and 121st respectively). Interestingly, Brazil is one of the BRICS nations (Brazil, Russia, India, China, South Africa), which were tipped as ‘up-and-coming’ business hotspots. This ranking goes some way in further quantifying their success in the global marketplace.

Are there any unexpected results?

It’s interesting to note that there are now 51 economies that have more favourable tax practices for entrepreneurs than the US. Although despite this, its entrepreneurial culture and deal opportunities for the same people are consistently topping the charts.

Another prominent observation of the study is the important shift of several Central Eastern European countries (Hungary being the exception) in the ranking. The Baltics, Romania, Slovenia and Slovakia remarkably increased their attractiveness and now rank at levels we consider highly attractive, where investors should increase their exposure. The top Eastern performer is Poland, in 25th place and even ahead of some Western European peers

The index team is led by professors Alexander Groh – emlyon business school-, Heinrich Liechtenstein – IESE – and, researcher Karsten Lieser and project manager Markus Biesinger.

Alexander Groh, emlyon business school

Alexander Groh

As a Professor of finance, my primary research areas are Venture Capital, Private Equity and Entrepreneurial Finance. I am thus coauthor of the Global Venture Capital and Private Equity Country Attractiveness Index, which ranks countries according to their investment attractiveness.
I also run the Research Centre for Entrepreneurial Finance (ReCEntFin), whose major contribution is the creation and dissemination of research on entrepreneurial finance, to enhance transparency and mutual comprehension between entrepreneurs and financiers. This research centre is part of the Entrepreneurship & Growth cluster.

More information on Alexander Groh:
His CV online
• His ResearchGate page

Further reading…

  • Groh, A., Liechtenstein, H., Lieser, K., Biesinger, M. (2016). Global Venture Capital and Private Equity Country Attractiveness Index. IESE Business School, emlyon business school.
    Read online