Concerns that American venture capital firms are pouring huge sums of money into foreign markets at the expense of U.S. companies are unsubstantiated, according to a survey conducted by Deloitte & Touche LLP and the National Venture Capital Association (NVCA).
The results are based on 528 responses from small, medium and large venture capital firms around the globe, including 45 percent from the United States and 31 percent from Europe. The respondents have assets under management ranging from less than $100 million to greater than $1 billion.
The core question addressed was: What number of U.S.- and non U.S.-based VCs are investing outside their country and why?
The survey said that of U.S. VCs, 54 percent are not investing outside the country, while 46 percent are. That contrasts a higher number of global and non-U.S. VCs investing outside their countries.
“U.S.-based VCs are essentially dabbling in global markets, with the majority of U.S. VC respondents indicating that less than 5 percent of their capital is invested overseas,” said Mark Jensen, partner and national director, venture capital services at Deloitte & Touche LLP.
He’ll be the featured speaker for the kickoff session at Capital 2.0 – Funding the Telco Future, a one-day event bringing together experts in capital markets and top telco executives to define and build atop common ground and identify opportunities.
Others say the situation has not changed much since last year.
“When we look at VC plans overseas for the next five years, the percent is only one percent higher than last year’s figure,” explained NVCA President Mark Heesen, noting that the survey has been conducted for three years now. “U.S. VCs are continuing to look outward for new markets. [Some] are making a very significant minor investment in companies outside the U.S. We also see non-U.S. VCs investing more outside their countries.”
Jensen said most U.S. VC’s investing outside the country say they have two to three deals globally.
“Venture capital is a contact sport,” he said. “They have to be close to their companies and work closely with them.” They invest only with investors whom have local funds in foreign countries, he added.
Heesen agreed, saying there’s a small but dedicated group of VCs who have embarked upon a global strategy. “But as a whole, the venture capital industry has not embraced direct global investment yet,” he said.
The survey revealed that U.S. VCs are investing cautiously in countries such as China, India, Israel and Canada, saying that they prefer to play globally by investing in domestic companies with significant operations offshore versus directly investing in foreign entities.
Deloitte & Touche LLP www.deloitte.com
National Venture Capital Association www.nvca.org
