,U. S. Competitiveness and Private Equity,Karen G. Mills kmillsmmpgroupinc.com,Council of Foreign Relations December 13, 2005,The rise of private equity in Asia: opportunity or threat?,2,Asia will become an increasingly viable venue for private equity deals,3,Investments are growing but little is venture,Asian Private Equity 2005 January-June ($Billions),Source: Asian Private Equity Review,4,Firms raising funds or investing funds in Asia in the first half of 2005:,Source: Venture Capital Journal,5,Latest news for foreign investors is mixed,6,Why do we care?,The dynamism and transparency of American Capital markets have historically served as a powerful contributor to U.S. innovative capacity” - Scott Stern CFR 2005 We worry Will there be enough capital for U.S. opportunities? Will Non-U.S. innovative capacity grow to rival ours?,7,Last year $57 billion was invested in private equity,Source: 2004 NVCA Year Book,Capital Commitments to Private Equity Funds 1979-2003,8,Institutions not individuals provide most of the funds,Source: 2004 NVCA Year Book,Private Equity Commitments By Limited Partner Type,9,Private equity is beginning to operate as a global business,Illustrative,10,Non-U.S. investments in private equity are accelerating,Source: Greenwich Associates,U.S.,Continental,Europe,U.K.,Canada,Japan,41,3,27,9,20,8,14,14,4,4,44,28,28,28,8,Percent of institutions investing in private equity,Now Invest,Plan to Invest,U.S.,Continental,Europe,U.K.,Canada,Japan,41,27,20,14,4,Percent of Institutions that invest in Private Equity,Now Invest,Plan to Invest,Now Invest,Plan to Invest,11,DISCOVERY,How does innovation translate into American jobs?,Basic Research,Invention,Innovation,Commercialization,Growth,BUSINESS FORMATION,JOB CREATION,Large Company Expansion Entrepreneurship,12,Venture Backed Growth,2000-2003 Percentage Change,12%,7%,-2%,7%,5 pp,9 pp,Sales Growth,Job Growth,Venture capital backed companies grow faster and create more jobs,Source: National Venture Capital Association; Global Insights study,Venture Backed,Total U.S.,Venture Backed,Total U.S.,13,Venture capital funding spurs innovation more powerfully than R&D,* Innovation is measured by patent production Source: Samuel Kortum and Josh Lerner, RAND Journal of Economics, Winter 2000,14,Venture and buyout investing are quite different,15,Capital Commitments to Private Equity Funds,Buyouts and Mezzanine capital is also being used to grow businesses,Source: 2004 NVCA Year Book,Other Private Equity Capital,Buyouts and Mezzanine Capital,Venture Capital,16,The trend is clear; the effect on the U.S. is unknown but not worrisome,Non-U.S. capital will be increasing investments in private equity of all kinds. Non-U.S. deal opportunities will be increasingly attractive to U.S. based capital. Private equity skills and market support will increase rapidly in non-U.S. markets particularly Asia. There is no evidence that U.S. interests will be harmed.,17,Karen Gordon Mills,Karen Gordon Mills was a Founder and Managing Director of Solera Capital, a private equity fund based in New York City. She has been in the industry since 1983 and is an expert in investing and growing companies in traditional U.S. based industries such as food, textiles, media and industrial components. Some of these companies and brands include Telex Communications, Mrs. Fields Cookies, Bruce Hardwood Floors and Annies Macaroni and Cheese. Her background also includes consulting for McKinsey & Co. and product management at General Foods. Ms. Mills received her A.B. from Harvard University in Economics in 1975 and her MBA from Harvard Business School in 1977, where she was a Baker Scholar. She currently serves on the Boards of the Scotts Company and Arrow Electronics.,