From Bevans Branham of Palm Springs, CA:
Every year, venture capitalists are asked about their thoughts regarding investing outside of their home country. It seems to make sense that these types of investments would be very lucrative, countries outside of America account for 86% of the users of top internet sites like Facebook, Twitter, LinkedIn, etc. Shouldn’t venture capitalists be tapping into this market as well?
Well, it turns out that many of these investors who spend so much time and money in their home country (usually Silicone Valley area) are very averse to investing in companies outside of the United States. What are some of the reasons that this is happening, and what can we do about it to ensure that we don’t miss the next big tech wave?
1) Home Bias
It shouldn’t be a huge surprise to anyone when I say that venture capitalists usually have a hometown bias. If you grew up, went to school, started your first company, and currently reside in an area like Silicone Valley or New York City it’s very likely that you’re going to think that companies and talent from that particular area is top-notch. This type of bias happens all the time (and not just with VC’s), so it’s no surprise that when it comes to spending money, VC’s are a little nepotistic.
2) Physical Proximity
If you’re investing in an early-stage startup it’s very likely that you’re going to want to be involved in many of the decisions that this company is going to be making. If it requires a 10 hour flight for you to get to a board meeting, this could be a major barrier to you being as effective with this company as opposed to one which is located in your hometown. Because of this, many VC’s don’t want to invest in potentially-good companies not located near them because they feel as though they won’t be able to help out as much as they’d like to.
Though there are these obstacles, this shouldn’t deter everyone from investing abroad. In fact, entrepreneurs all over say that Silicon Valley knowledge and expertise in places like China, Japan, Africa, and Mexico is in very high demand. If an investment company were able to secure locations in these areas it’s very likely that they would be a hit among the entrepreneurs of the area. Along with that, they would have the unique ability to invest in companies that Silicon Valley based investment firms would be too afraid to invest in. Hopefully these barriers will be eliminated in the near future so we don’t miss the boat on the big companies of the next 10 years.
via Bevans Branham Venture Capital http://ift.tt/1tCOR8C
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