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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Came across Will Price’s response to Sevin Rosen’s recent decision to abort their latest fund-raising (Hat Tip: Arun Natarajan, Venture Intelligence India). Excerpts:
“I must say that I find it remarkable that a set of investors whose professional existence is predicated on funding disruption and innovation are publicly advocating that an end-state in the venture capital industry has been reached; that no viable models exist, no innovations exist, no disruptions exist that will allow people to rewrite the venture rule book and add value.
There are no end-states, but rather constantly changing constraints that demand adaptation to ensure survival in the brave new …
…The context today is quite clear – and commented on by me here – surplus capital, relatively poor IPO market, and too many venture firms/people.
In the face of stark constraints, the challenge is to define an intellectually credible strategy for creating value that incorporates today’s realities rather than ignores them.
…My read is that firms will need to go earlier to avoid the ugly exit realities, or they will go abroad to leverage growth markets.
…Life is disruptive and all business people – operators and investors – need to constantly question their strategies and demand an intellectually credible answer to how to best compete given the exogenous variables at work in any given industry.
…While I have great respect for Sevin Rosen’s track record, I am not quite sure why going on CNBC to discuss the “broken” industry is a good idea.”
Well said.
October 25th, 2006
Posted by
Shantanu |
Globalization, Venture Capital, Venture Capital in US |
no comments
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 |
no comments
Javier Loizaga, EVCA Chairman inaugurated the conference this morning reminding everyone that a record amount had been raised by European VCs in ’05 – the highest ever if we ignore the “irrational” years of ’99-’00.Paul Deninger, Vice Chairman, Jefferies & Company, Inc. Chairman, Jefferies Broadview made a Presentation on current state of technology finance titled, Is this the European decade?” some salient points:
NASDAQ is still the foundation of how people “feel” about the technology market
- Amount of activity is not even close to IPO activity pre-bubble (on NASDAQ)
- By contrast, European markets showing strong activity (AIM as well as EuroNext)
- But in terms of “quality deals ” (raise > $20m), NASDAQ has sustained its lead over Europe
- Only one of the Top 10 Global IPOs last year was done in NY (compared to 4 of the top 10 in 2000 in US; of which 2 were non-US) – SOX to blame?
- Liquidity on AIM for market caps of £50-70m is comparable to NASDAQ (this is stunning news…)
- Tech M& A has been flat since 2001 in US but Europe is looking better (better than every year in fact except ’99 – 00 and in terms of amount/value better than every year except 2000)
- The mood in Europe is in the right direction
- Likely exit path for US backed companies has moved decisively in favour of M&A
Keep Reading…
October 12th, 2006
Posted by
Shantanu |
China, Conferences and Panels, Europe and Asia, Globalization, India, Venture Capital in Europe |
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Ed Sim recently wrote a nice post on Globalization (after a long time – his last entry in this category is dated Jan’06). Ed is one of the few VCs who are explicitly thinking about globalization and what it means for the world in general.
I read with interest his views on outsourcing and how it has panned out across his portfolio of investments. I am watching this space closely and trying to get more of our companies to think about leveraging the cost/skills base present not just in India but also in Eastern Europe.
For many European companies, Eastern Europe is a more natural (and less daunting) opportunity than India (although it doesn’t seem to make a difference to some companies).
Having said that, quite a few Indian companies are now setting up shop (or already have offices) in Eastern Europe (see this TIME magazine article from June ’06: “Bangalore Goes Global”). In this sense at least, globalization is truly happening
Ed reproduced a graph from the Economist on his blog to make the point that it is not just low-level work that is now moving offshore. To quote:
“The last graph is quite interesting as it relates to us technology folks. We have always thought of India and China as places to offshore low-level development work. Yes, a lot of that has already been done but what is alarming is what may happen in the future as the comparative advantage that India and China have over us in terms of college graduates in science and math is overwhelming.
Keep Reading…
September 28th, 2006
Posted by
Shantanu |
China, Emerging Markets, Globalization, India |
2 comments
On the heels of my earlier post, I came across this article by Tony Blair on MSNBC/Newsweek: “Europe is falling behind“.
Some excerpts:
Complaining about globalization is as pointless as trying to turn back the tide. There are, I notice, no such debates in China. They are not worrying about potential threats but are busy seizing the opportunities in ways that are transforming their society and ours as well. So, too, are the other emerging economies in Asia and South America. I am proud that the United Kingdom’s economy has grown twice as fast as Germany’s and four times as fast as Japan’s since 1997. I am, however, painfully aware that China has been growing three times as fast as the U. K.
Keep Reading…
September 4th, 2006
Posted by
Shantanu |
Globalization |
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