For the past decade, we have witnessed a globalization of the venture capital industry. Venture capital firms in developed economies have increasingly deployed strategies that have allowed them to take advantage of the opportunities in emerging markets and we have witnessed venture capital industries develop in emerging markets around the globe, particularly (but not limited to) in China, India, Israel and Brazil.

This year, however, we are seeing some significant shifts in these trends. Some of the most notable include:

• The growth of cross border investment has begun to plateau.  The survey results indicate that the venture capital firms that currently invest outside their home country are unlikely to be expanding their international investing strategy in the near future and we are seeing less firms planning to deploy new international growth strategies.
• The number of venture capital firms and amount of venture capital available for investment in the U.S are expected to contract while the number and the amount of venture capital available is expected to grow significant in emerging markets, such as China, India and Brazil.
• It is anticipated by U.S. based VCs that their Limited Partners will be increasingly interested in deploying a higher percentage of their assets in emerging markets during the next five years.
• The uncertainty and threat of changes in the regulatory and tax environment in the U.S is impacting the attitudes of U.S. venture capitalists significantly in terms of how they view the outlook for the U.S. venture capital industry. In past years, U.S. based venture investors saw very few impediments to investing in the U.S.  This year, more than half of U.S. respondents had concerns about the tax, regulatory and market environments in the U.S.
• Despite the challenges cited by venture capitalists in developed countries, venture capitalists in all countries continue to be optimistic about the quality and quantity of deal flow in the next five years.

I encourage you view the full results of the survey and our full analysis: press release; slide presentation.

It is clear that the globalization of the venture capital industry is no longer being driven by the flow of venture capital from developed countries to emerging countries.  Optimism abounds in emerging markets and sophisticated venture capital players are entrenched now in those markets and are well positioned to take advantages of the opportunities that exist in those markets in a wide range of sectors. 

Nevertheless, this is not a zero sum game.  The fact that there are more sophisticated venture capital and entrepreneurial markets outside the U.S will only help strengthen opportunities for U.S. based venture-backed companies that are “going global” from the first day of inception.  This trend bodes well for future performance for U.S. venture capital firms.