It’s Not Just Silicon Valley Anymore - Venture Capital is Going Global
The United States has long dominated the venture capital landscape.
Specifically, in Silicon Valley.
It has been (and still is) the epicenter of the start-up world, as a hub for fledgling companies developing emerging technology alongside vast amounts of private capital used to drive innovation.
Recently, there’s been a shift, with signs pointing to VC’s looking overseas for new opportunities.
For instance, in 2021 global venture capital investment totaled $643 billion, a 92% increase over the $335 billion invested in 2020.
Despite some reports of a global slowdown of venture capital funding in the last quarter of 2022, there continued to be a high volume of innovation and unicorn start-up valuations throughout the past year.
As an investor, it is important to understand some of the reasons why venture capital is “going global”, and where in particular these new opportunities for growth are located.
Technology is also increasingly becoming an international skillset, and the tech industry still dominates start-up activity and VC funding.
What is causing venture capital to go global?
There are a few trends driving the boom in international venture capital funding.
First, a portion of the increase in venture capital funding can be attributed to markets rebounding from the uncertainty and economic disruptions caused by the global COVID-19 pandemic.
Besides this temporary surge, there are several long-term factors driving the increase in international venture capital.
One factor is that regulatory changes are making business climates more attractive in certain regions.
Countries that simplify the process for companies to incorporate typically experience higher early-stage startup growth. Spain recently adapted EU investment rules and regulations which allows businesses to expand more easily due to consistent legal requirements.
Additionally, international firms and investors looking looking to venture capital for new capital growth opportunities. For example, Xiaomi is a major Chinese smartphone and consumer electronics company that started Xiaomi Ventures to reinvest their capital in new start-up business opportunities.
Where is venture capital going global?
Across the globe, different regions are experiencing rapid increases in the total amount of venture capital funding and start-up companies.
Europe and Asia in particular are regions that have several flourishing startups.
In Europe, certain countries such as Austria, Switzerland, Sweden, and Spain all reached their highest levels of venture capital funding in 2021, according to data from the OECD.
The United Kingdom also remains a growing hotbed for VC dollars, hosting nearly half of all tech unicorns created in Europe in 2021. The fintech sector and other tech startups are particularly bolstered by the strong financial hub of London.
In Asia, technology firms are driving innovation, particularly in major population centers in countries such as China and India. Beijing and Shanghai are both on the list of the top 10 worldwide cities for total venture capital dollars raised.
What are some global VC companies?
In 2022, more international companies were reaching unicorn start-up status than ever before.
The following three examples are companies leveraging technology to revolutionize industries across the globe. Each of these start-ups recently crossed the $1 billion valuation threshold in 2022.
MultiVerse - United Kingdom
Presenting itself as an alternative to a traditional university route, MultiVerse provides a platform for career opportunities via apprenticeships. This tech start-up is headquartered in London and was founded in 2016.
In June 2022, they announced a $1.7 billion valuation after a $220 million funding round while targeting expansion into the United States.
TravelPerk - Spain
TravelPerk, founded in 2015, reached a $1.3 billion valuation in January 2022 following a $409 million Series D funding round.
Based out of Barcelona, this company was founded as a platform for managing corporate travel and expenses.
AiBee - China
AiBee is a technology start-up company focused on artificial intelligence in the fields of speech recognition and natural language processing.
In March 2022, the Beijing-based company surpassed the billion dollar threshold after a funding round from Xiaomi Ventures.
What does venture capital going global mean for investors?
While Silicon Valley and the United States are unlikely to be displaced as the primary VC market anytime soon, companies such as MultiVerse, TravelPerk, and AiBee are proving that high growth companies can come from anywhere.
For investors, the increasingly globalized venture capital landscape has two major positive benefits.
First, there will simply be more opportunities for bigger returns. More unicorn startups in general means more chances for success.
Second, increased exposure to international VC firms allows investors to pursue greater diversification strategies within their portfolios.
Even a few investments in companies outside of the United States decreases geographic exposure to diminishing returns from one particular country or region
Continue following Venley Capital for opportunities to invest in start-up opportunities that are poised for high returns.