Want to invest? Why not consider global markets.

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.

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Venture Capital Deals Jump 12% in Q3: Uber Leads the Way

From Bevans Branham of Palm Springs, CA:

Uber, a popular on-demand car service company, has a bit more cash-on-hand after this year’s third quarter investments.

According to an article posted on VentureBeat.com, Uber received $258 million in the third quarter of 2013, which made the organization #1 for venture capital raised in that time period; this in a market where over 10,000 startups received $7.8 billion in funding from venture capitalists.

The article goes on to break down VC spending by industry, but overall, the author writes, the market saw a 12% increase in investment from the second quarter, as well as a smaller increase when compared to 2012 numbers.

But the most important statistic, he argues, came out of the software industry, which received more investment money than in any quarter during the last 12 years. This record number manifesting in $3.6 billion in investments, which, according to the article, shows a 23% jump from the second quarter.

Why such a large increase? VentureBeat attributes some of the leap in funding to major deals such as $196.5 million for Palantir, a data analysis software company; $80 million for Clarabridge, which provides software to analyze unstructured data; $70 million for an organization called Deem, responsible for making business management software; and $65 million for Toa Technologies, a firm the produces mobile workforce software.

The article also discusses a report conducted by PriceWaterhouseCooper, The National Venture Capital Association, and Money Tree, in which Mark McCaffrey of PwC told reporters, “It’s an exciting time to be an entrepreneur with a software company… The continued increase in valuations for innovative and disruptive technologies in software-related companies, coupled with the increase in exit activity, is driving venture capitalists to make more investments in this space.”

And investors are even more optimistic about the future. According to the article, not only will 2013 investment numbers likely trump the previous year, but many of these investments, particularly in software fields, reflect early-stage funding. In other words, there’s good reason to believe the numbers will be on the rise in the near future.

“We are balancing this optimism, however, against the recognition that VCs are still trying to gain exits for the previous generation of companies,” John Taylor of the National Venture Capital Association told reporters. “There is some improvement on that front, but we would like to see it strengthen even further.”

Biotech was a distant second in terms of industries, the author writes, raising $852 million in the third quarter.

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Venture Capitalist: Energy Storage for the Future

From Bevans Branham of Palm Springs, CA:

California passed a bill stating that one third of their total energy supply must be in the form of renewable energy by the year 2020. This bill has pushed major venture capitalists such as Peter Thiel and Vinod Khosla as well as major corporations like General Electric CO and Microsoft Corp to fund various different projects. Thiel and Khosla have invested money into compressed air as a means of energy storage. The idea works in tandem with windmills, energy is generated by the mills which are then funneled beneath the earth as compressed air. The compressed air is stored in a geologic storage structure, and when the air is needed it is funneled back to the surface and heated to produce electricity.

Energy storage is considered the “Holy Grail” as studies show that in California; grids have 51 gig watts of peak capacity for heat to boost air conditioning demand even when it only requires two thirds of that amount for the majority of the year. Unfortunately, the cost of building a battery substitute for the current natural gas powered plants is a major deterrent. Major storage companies such as A123 and Flywheel maker have already filed for bankruptcy. This doesn’t even account for the once available government subsidies which have since then run dry. However, the issue still remains that a substitute form of energy storage must be utilized by the year 2020. With venture capitalist funding the projects, the challenge becomes more business oriented which will hopefully promote the severity of the need for renewable energy.

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