Some sobering remarks and thoughts from a recent TIME magazine article on the WEF in Davos (”Lovely While It Lasts”, Pg 36, TIME Europe, Feb 5, ‘07)…
Zhu Min, Vice President, Bank of China:
- “I am more and more convinced that we’ll have a much tougher situation in the coming years” (talking about the $1 trillion in reserves held by China’s central bank to which another $200billion will be added this year)
China and India together account for about 40% of the world’s population but only 6% of the world’s economic output. By contrast, the US, Japan and Western Europe make up 15% of the global population but account for 80% of its output…(as a consequence…)
- “…There is a great gap and it is going to be bridged over the next 20 years…we are going to see fundamental changes in the center of gravity and the center of power” Jacob A. Frenkel, Vice Chairman, AIG
German Chancellor Angela Merkel:
- “…for the past 200 years, we got used to a Eurocentric view of the world but today we can see that this type of overview is over…”
Laura D. Tyson (ex-Dean, LBS and now Prof at Haas Business School)
- “I do worry how the U.S. will respond to the fact that its hyper-power status in terms of finance and wealth has to be reduced over the next 25 years”. She has reason to worry: most Americans (… and I would add Europeans – SB) have no idea so elemental a shift of power is now under way.
and finally,
- “All the panelists said that they were concerned that the big questions relating to globalization, including the huge power shifts under way from the developed economies to the developing ones, were not being well explained in the West”
Worrying…
January 31st, 2007
Posted by
Shantanu |
China, Emerging Markets, Europe and Asia, Globalization, India, USA and Asia |
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I was very fortunate to be part of the UKTI Delegation at the “Mind to Market” conference that concluded in New Delhi yesterday (6th Dec).
India is “hot” these days and so is innovation and entrepreneurship. But this was not always so. As good friend, Shai Vyakarnam mentioned in his talk, an event like this would have been unthinkable even as recently as five years ago.
Innovation may have been stifled during the license-permit raj but entrepreneurship never died in India.
Keep Reading…
December 7th, 2006
Posted by
Shantanu |
Delegations, Emerging Markets, Entrepreneurship, Europe and Asia, India |
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A few weeks ago, in response to a post by Ed Sim, I wrote that for me, Globalization was really about opening new markets (particularly in Asia) for our portfolio companies.
A great illustration of why global markets matter is CSR – a company that we funded in 1998. CSR today is a world-leader in bluetooth and 802.11 chips – and from its earliest days, was focused on exploiting overseas markets for its products.
Throughout its growth phase, CSR continued to derive c. 75% of its revenues from Asia. In 2005, almost $398m of the $487m in total sales were from Asia.
When you think about the products that CSR’s technology goes into (primarily mobile phones), that number does not seem surprising (China and India alone added 25% of all new subscribers last year at 120m+).
In the last few years, we have seen an increasing number of our portfolio companies trying to enter Asian markets…and when you consider the facts below, you begin to understand why:
Asia today:
- Is the fastest growing market for telecoms & wireless products and technologies worldwide
- Has the largest mobile user base in the world (China)…and very soon, will have the largest number of online users, and broadband subscribers
. China is on track to become the biggest consumer of semiconductor chips in the world within the next decade
. India added a whopping 5.8m mobile subscribers in last month alone – the biggest growth anywhere in the world. It is adding the equivalent of the entire population of Britain EVERY year and yet the total number of subscribers are only 110m
. On almost any metric of personal consumption, Asian economies have the fastest growing markets in the world (e.g. TV Sets, Air-conditioners, MP3 players etc) that will soon also be the largest
. There are entire sub-sectors within technology that are shifting “eastwards”. A good example is the fact that there is no US/ European TV manufacturer left in the world today except Philips
. At 400m+ subscribers, China still adding 5m new subscribers every month. 30% of GSM users in the world are in China
. Before long half of all mobile users are expected to come from India and China alone
As you let these facts sink in, it becomes obvious why venture capital HAS to globalise – It is about end-markets*, it is about growth, it is about customers and increasingly it will be about technology
For VC firms and their companies, globalization is no longer a matter of choice. What is not obvious is how do you do it well? And which models work better than others… that is perhaps where the seeds of competitive advantage and differentiation lie.
* For a powerful illustration of these end-markets, see this graph below:
.
P.S. See also: Globalization – What’s it got to do with me?
November 11th, 2006
Posted by
Shantanu |
China, Emerging Markets, India, Venture Capital |
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At the TechVenture Asia conference, I picked up these depressing statistics:
The data comes from Cambridge Associates who have also included their data from 2004 to get a sense of perspective:
From Cambridge Associates’ 2004 report: “In aggregate, the historical performance of private equity partnerships in Asia has been disappointing…Asia remains a region of greater potential than of actual opportunities for private equity investors, but that potential is gradually becoming more tangible, less will-o’-the-wisp and merits close attention in light of the regions dynamic growth prospects…”
Mean End-to-End Performance as of 31 March 2004*
|
|
One Year
|
Three Years
|
Five Years
|
Ten Years
|
| U S Venture Capital |
3.03%
|
-19.62%
|
46.36%
|
38.57%
|
| U S Private Equity |
27.91%
|
3.86%
|
5.04%
|
11.06%
|
| European Venture Capital |
-4.44%
|
-19.59%
|
-3.51%
|
6.00%
|
|
European Private Equity
|
27.98%
|
16.68%
|
14.62%
|
16.25%
|
| Asian Venture Capital & Private Equity combined |
22.96%
|
-0.14%
|
1.38%
|
0.49%
|
Things have obviously come a long way since then for Asia…here are the updated performance figures for 2006:
Mean End-to-End Performance as of 31 March 2006*
|
|
One Year
|
Three Years
|
Five Yrs
|
Ten Years
|
| U S Venture Capital |
13.8%
|
9.9%
|
-6.5%
|
39.5%
|
| U S Private Equity |
31.8%
|
27.3%
|
12.2%
|
13.4%
|
| European Venture Capital |
1.9%
|
-1.0%
|
-9.0%
|
0.8%
|
| European Private Equity |
31.5
|
30.2%
|
22.3%
|
20.9%
|
| Asian Venture Capital & Private Equity combined |
24.4
|
20.8
|
7.0%
|
4.7%
|
* Pooled end-to-end mean return net of fees, expenses and carried interest as calculated by Cambridge Associates
Whats dragging European venture down?
November 2nd, 2006
Posted by
Shantanu |
Emerging Markets, Europe and Asia, Venture Capital, Venture Capital in Europe, Venture Capital in US |
no comments
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
Shantanu |
China, Emerging Markets, Globalization, India, Venture Capital in US |
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My friend Ashutosh Sheshabalaya recently wrote a great piece for The Globalist titled, “The Three Rounds of Globalization*”
He has analysed Globalization over the course of history and identified three distinct phases. In the article, Tosh argues that “globalization is not a new thing. It has been with us since the dawn of history”.
“…Well before trade in goods and services, globalization consisted of the exchange of ideas across distinct civilizations — as opposed to loosely structured nations and/or tribes. Such ideas helped form worldviews and shape the world materially….
Quite a few of these ideas originated in India, China, Greece and Rome. And undoubtedly there was significant cross-fertilization between these ancient civilizations, alongside the vanished memories of Babylon and Egypt….
…Evidence of such enriching exchanges are demonstrated in the writings of Megasthenes, the 4th century B.C. Greek Ambassador to India, or Chinese scholar Hieun Tsang, who visited India’s 2,000 tutor-staffed Nalanda University a millennium later…At the time, Europe, as we should recall, was only beginning to settle down after the trans-territorial forays of the Burgundians, the Ostrogoths and their energetic cousins.
…The Arabs were among the first ambassadors of the realm of ideas. Readers of the Islamic scholar Alberuni know that it was Arabs who transferred Indian science, medicine, literature and, above all, mathematics to western Europe….As Alberuni said, these are subjects which either are noteworthy for their strangeness, or which are unknown among our own people. This was the First Round of Globalization.. ”
Keep Reading…
October 24th, 2006
Posted by
Shantanu |
China, Emerging Markets, Globalization, India |
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