Survey shows more US venture capital firms investing abroad

Survey shows more US venture capital firms investing abroad
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First Published: Tue, Jun 03 2008. 11 02 PM IST

Attractive market:Managing director of IBM’s Venture Capital Group Claudia Fan Munce
Attractive market:Managing director of IBM’s Venture Capital Group Claudia Fan Munce
Updated: Tue, Jun 03 2008. 11 02 PM IST
Attractive market:Managing director of IBM’s Venture Capital Group Claudia Fan Munce
San Francisco: Taiwan, Japan and Israel are just some of the emerging hot spots for innovation outside the US, as venture capitalists continue to pour more dollars into global investments, a new survey said on Monday.
Nearly three out of every five US venture capitalists, or 57%, are now investing outside the country, compared with 46% last year, the 2008 Global Venture Capital Survey found.
The survey measured the opinions of nearly 400 venture capitalists from around the world, including 163 US-based companies, and was conducted by Deloitte Llp. and the National Venture Capital Association (NVCA), a US trade group.
Although the US maintains its pre-eminent position as global leader in innovation, NVCA president Mark Heesen said there will be more venture activity in those destinations ranked No. 2 and No. 3 in the survey.
“The secondary trends are more interesting because it shows the up-and-coming locations,” Heesen said.
The US held the top spot in each of the sectors measured—semiconductors, software, biopharmaceuticals, medical devices, and alternative, or clean, technology.
But Germany ranked second for innovation in alternative energy and medical devices. Some 15% of venture capitalists said Taiwan had the best semiconductor technology, after the US. India ranked No. 2 for software innovation, followed by the UK, Israel and Germany.
“While the US isn’t losing ground, the globalization of innovation is under way,” said Mark Jensen, national managing partner of Deloitte’s venture capital services.
US venture capitalists have begun pumping more money into start-ups in other countries; last year, they put in nearly $9 billion (Rs38,250 crore at current exchange rates), or one-fifth of all dollars they invested, into international investments.
About $2.5 billion of this amount went to China and India, still two of the hottest emerging markets for venture dollars, compared with $1.9 billion in 2006, according to data from Thomson Reuters and NVCA.
“Asian countries have advantages over the US when it comes to technology,” said Dixon Doll, founder of DCM, an Asia-focused venture firm. In addition to well-trained and “reasonably priced” engineers, countries such as China and India “typically know and can figure out the relevant ways to build local services...optimized for the requirements of local users,” Doll said.
The combination of local talent and local markets has led tech giant International Business Machines Corp. (IBM) to focus more keenly on emerging economies, said Claudia Fan Munce, managing director of IBM’s Venture Capital Group, in a recent interview.
IBM does not invest in start-ups, but instead partners with traditional US venture capital firms in their search for marketable technologies.
Fan Munce said her international travel has shot up in the past year because more and more venture capitalists are looking beyond US borders for the next big idea.
She listed Canada, Peru, Vietnam, Russia and Ireland as new centres for technological innovation, in addition to the Bric countries (Brazil, Russia, India and China).
“IBM follows the money,” she said. “We want to go (to emerging markets) when they have dealflow.”
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First Published: Tue, Jun 03 2008. 11 02 PM IST