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7 March 2016

Globalisation of innovation reaches new heights

Corporations have an extensive global network, and so some such as Naspers, Intel, Qualcomm and others have had significant successes through global venture investing.

Author: Toby Lewis, chief analytics officer

The globalisation of venture capital and the proliferation of strong local start-up ecosystems in recent years has been astonishing to observe.

One of the most exciting things about tracking corporate venturing units is they have spearheaded much venture capital activity overseas. This means Global Corporate Venturing has had significant exposure to huge transformations in emerging markets, that have quickly become major technology ecosystems. 

The individual nature of financial venture capital makes it a distinctly regional endeavour, especially because start-ups coming out of Silicon Valley have such high potential and such a strong record of success. While top tier groups like Sequoia and Accel have significant activities in India, China and Europe, many venture firms have steered clear of globalisation. Internationalisation increases risk for financial venture capital firms which all have small teams, while at the same time having ample possibilities in their home market. This combination of factors means while opportunities for return may be great in globalisation, many venture firms have been slow to globalise.

Corporations, by contrast, have an extensive global network, and so some such as Naspers, Intel, Qualcomm, Siemens and others have had significant successes through global venture investing. A particular trend of late has been aggressive investing by the large Chinese technology corporations led by Tencent, Baidu and Alibaba, which have both been highly active in Silicon Valley and at home in China, where high growth companies in the market last year took a significant share of bigger deals.

Certain countries and regions have stood out as attracting investment. Deals in China have been particularly eye-catching in recent years, while Indian start-ups have also attracted large sums. At the same time Israel’s buoyant start-up ecosystem has continued to attract significant interest from global corporations, while Europe has also become much more developed as a region for start-up investment in recent years, with different countries specialising in certain areas. At the same time Japan has its own particular ecosystem, which has long generated success stories.

Other markets like Brazil and wider Latin America, Southeast Asia and Australasia, Russia and Central and Eastern Europe, and the Middle East also have start-up ecosystems which are beginning to form in their own particular ways.

Intriguingly a rise in overseas investment to many of these countries appears to have driven an even greater growth in investment by domestic groups, particularly in China.

GCV Analytics data shows corporate venturing activity has more than doubled by number of deals since 2012 and quintupled in the size of deals corporates have been taking part in such transactions. Yet particularly for larger transactions we have noticed domestic groups have been stepping up to take a growing share of their country’s  big deals (see chart). Perhaps counter-intuitively a consequence of increased global investment flows, is national groups appear to be more willing to back their own country’s high growth champions. 

Domestic investment on the rise

Given our interest in the globalisation of innovation theme, Global Corporate Venturing has become a media partner of the Global Technology Symposium, an investment conference on global venture capital, technology and entrepreneurship., which takes place on March 31 to April 1 in San Francisco. I will be moderating a panel there on regional advantages and looking to tease out what makes different centres of innovation special. Alexandra Johnson, founder and president of Global Technology Symposium, said in a statement last week: “We have spent over a decade identifying technology’s next big trends, and now we are looking at what inspires these trends and in which industries these trends are headed. This is no longer a conference series but a gathering of minds to shape today and tomorrow.”

This Symposium promises to “bring together business leaders, policymakers and hot startups together to explore how to leverage globalisation and identify new ideas in every corner of the world.” Given there has surely never been a better time in the globalisation of start-up ecosystems, it will be with great interest we speak and listen to what people have to say at the event. 

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