More U.S. VCs invest abroad

SAN FRANCISCO (Reuters) – Taiwan, Japan and Israel are just some of the emerging hotspots for innovation outside the United States, as venture capitalists continue to pour more dollars into global investments, a new survey said on Monday.

Nearly three out of every five of U.S. venture capitalists, or 57 percent, are now investing outside the country, compared with 46 percent 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 U.S.-based firms, and was conducted by Deloitte LLP and the National Venture Capital Association, a U.S. trade group.

Although the United States maintains its preeminent position as global leader in innovation, National Venture Capital Association 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 United States 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. Fifteen percent of venture capitalists said Taiwan had the best semiconductor technology, after the United States. India ranked No. 2 for software innovation, followed by the U.K., Israel and Germany.

“While the U.S. isn’t losing ground, the globalization of innovation is underway,” said Mark Jensen, national managing partner of Deloitte’s venture capital services.


U.S. venture capitalists have begun pumping more money into start-ups in other countries; last year, they put in nearly $9 billion, 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 to $1.9 billion in 2006, according to data from Thomson Reuters and NVCA.

“Asian countries have advantages over the U.S. 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 like 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 IBM (IBM.N: Quote, Profile, Research) to focus more keenly on emerging economies, said Claudia Fan Munce, the managing director of IBM’s Venture Capital Group, in a recent interview.

International Business Machines Corp does not invest in start-ups, but instead partners with traditional U.S. 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 U.S. borders for the next big idea.

She listed Canada, Peru, Vietnam, Russia and Ireland as new centers 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.”

By Anupreeta Das

(Editing by Carol Bishopric)