Venture Capitalists' Global View

The United States 'remains the primary investment target for venture capitalists (VCs) around the globe', according to a report sponsored by Deloitte & Touche LLP. India and China are among the other top locations but are not seen to be leading a 'brain drain' away from the US, despite more global thinking among the VC community generally.

According to Mark Jensen, National Managing Partner of Deloitte's Venture Capital Services: 'From a venture capital viewpoint, the perceptions of a brain drain from the United States to China and India are simply not true. The majority of VCs surveyed worldwide, including those based in the United States, still believe the United States is the best bet for entrepreneurial success.'

The report, the 2006 Global Venture Capital (VC) Survey is based on feedback from 505 Venture Capitalists worldwide during the second quarter of this year, and is produced in co-operation with the National Venture Capital Association (NVCA) in the US and numerous other venture capital associations around the world.

The survey suggests that the United States has the fewest impediments to investing of all regions worldwide, but US-based VCs find the current environment at home challenging in several ways, notably the threat of legal action as an additional financial risk (70% of US respondents vs 36% of others), and the high cost of compliance and corporate governance regulation (55% vs 28% elsewhere).

In the United States, 53% of the respondents intend to expand their global investment focus, with China (30%) and India (25%) the two top foreign countries of interest over the next five years. Both countries are seen as places where it is less expensive to build businesses, where there is an emerging entrepreneurial culture and where there is a high quality deal flow. US venture capital respondents rated India highest among overseas locations for access to quality entrepreneurs, and China as the number one country to get access to foreign markets.

Among the major trends, the report says the 'growing [US] interest in investing abroad is a true sea change for an industry that has historically invested all of its money domestically'; while data points strongly to 'a growing interdependence between US and foreign venture capital concerns, resulting in an unprecedented number of cross-border strategic alliances.' VCs worldwide are continuing to target technology sectors, with c.60% worldwide citing the software industry as a primary target sector, and c.53% communications & networking.

Responses were received from 505 VCs, with 55% based in the Americas, 24% in Europe, 17% in Asia Pacific and 4% in the Middle East.

The NVCA is online at www.nvca.org and Deloitte Touche Tohmatsu at www.deloitte.com .

All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas, 2024- by Nick Thomas, unless otherwise stated.