Global Themes

On Globalization & Venture Capital

Global VC Trends – Deloitte/NVCA Survey ‘06

Red Herring reported last week on Deloitte and Touche’s latest (2006) Global Venture Capital Survey with the headline “United States retains its edge in innovation, China and India remain top VC targets.”

It went on to say that, “Despite the opportunities presented by globalization, venture capitalists worldwide still view the United States as the world leader in innovation….This and other surprising findings were revealed Friday in the 2006 Global Venture Capital Survey…

I dont understand why anyone should find this surprising.

On almost any measure of innovation (no. of scientists, engineers, technologists, patents filed, resources devoted to R&D, market demand for new technologies etc) the US is so far ahead of any other economy today, that I would have been surprised had it received less attention than what is mentioned in the Red Herring story.

The suprise would be when (and I believe it is really a question of “when” not “if”) its pole position comes under serious challenge – most likely from China and India, but quite possibly from Europe as well.

The article cited “returns” as one of the reasons why the US continues to be an attractive market for a lot of VCs (both homegrown and from abroad) – that certainly rings true – especially when you look at the anaemic performance in European venture

Which factors are driving globalization? “When it comes to the reasons that firms do plan to go global, firms around the world agree that low cost labor and an upswing in the number of quality entrepreneurs make places like China and India more attractive than ever. Whether firms are located inside or outside of the U.S., they seek to expand mainly into parts of the world that are as low cost, entrepreneurial and tapped into foreign markets as possible.

The story also mentioned that:
. The U.S. leads the way in manufacturing, R&D, and engineering in the eyes of non-U.S. VCs

. China leads the way in manufacturing and India in R&D and Engineering in the eyes of U.S. VCs

– if true, this is very interesting – and I will try and dig into the survey to find why US and non-US VCs have such differing perceptions on manufacturing, R&D and engineering.

From Deloitte’s press release, I picked up some additional nuggets:

“U.S. venture capital respondents cited India as the number one country outside the U.S. where there is access to quality entrepreneurs. Conversely, they cited China as the number one country to get access to foreign markets.

However, both China and India have a number of impediments to investing. In China, the three biggest impediments to investing are: intellectual property laws, travel time and effort, and lack of knowledge/expertise in the business environment.

In India, top impediments are: travel time and effort, lack of knowledge/expertise in the business environment and lack of experienced local investors.

October 31st, 2006 Posted by | China, Emerging Markets, Globalization, India, Venture Capital in US | no comments

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