Venture Capital Investing Around the World
How VCs Are Changing Their Approach in 2019
As the founder and CEO of a consulting and venture capital group with an emphasis on developing markets, Blackhorse, LLC, I’ve always believed in the power of venture capital as a way of driving economic growth and scientific innovation around the world. Over the last few decades, I’ve worked with major companies all over the world as they look for meaningful investment opportunities in third-world countries, nations that often lack access to the latest advances in healthcare.
Looking ahead at the rest of 2019, venture capital investing continues to rise, with more investments taking place outside the U.S. This recent trend is spurring growth and innovation in new and emerging markets across the globe. VC firms are increasingly putting their money into healthcare startups as a way of making these essential services more accessible around the globe.
The Rise of Venture Capital
Global venture capital spending will continue to rise over the next few years, creating more competition in the marketplace. VC firms now have to compete with one another if they hope to land low-risk startups with the most potential in the marketplace. Forecasts show the global venture capital investment market is likely to grow at a CAGR of 27.48% during the period 2018-2022.
New approaches to VC funding are making it easier for firms and new players to make a splash in the market. Fintech companies and other tech startups, including those running on the blockchain, are driving investment growth across all different industries. This is disrupting the traditional approach to VC funding, effectively removing banks from the equation. In today’s highly competitive marketplace, investors can now engage directly with customers, helping them make faster decisions as they seek high-yielding assets with less risk.
Growing International Venture Capital
These trends in VC funding aren’t just limited to the U.S. In fact, the share of global venture capital activity captured by the U.S. has fallen sharply since the mid-1990s. The U.S. used to dominate the VC landscape, controlling around 95% of the market back in the 90s, but now those numbers are down to around 50%, falling over 20% in just the last two years. This means the U.S. is losing its competitive edge in the global venture capital investment market.
Startups and entrepreneurs now have more options than ever when it comes to securing funding for their projects. Countries like China and India are slowly emerging as some of the largest players in the industry, pouring millions of dollars into promising new business ventures. Both India and China are home to some of the biggest cities for startups, including Beijing, Shanghai, Delhi, and Mumbai.
As I look at the state of the VC industry, I’m also seeing more mega deals than in years past, or those with venture capital rounds of more than $500 million. Over the last few years, mega deals consisted of 60% of all VC deals done in Beijing and Hangzhou. This is leading to a concentration of wealth in the VC industry, with startups competing for funds from some of the largest firms in the world.
These trends are creating more competition in the global VC marketplace. Startups can now seek funding in countries all over the world, instead of limiting their search to cities like San Francisco, New York, and other Western cities with major tech hubs. This increase in international VC funding should lead to more globalization and international economic interdependence as more companies look across international borders for startup funding.
Venture Capital and Healthcare
The rise in healthcare venture capital funding is another trend I’ve noticed over the last couple years. Healthcare VC funding has surged in the U.S. with biotech and pharma companies dominating the market. Companies are looking for healthcare startups that have the potential to disrupt the status quo, making these medical services more affordable and effective for individuals all over the world. Having spent decades traveling all over the world, I’ve seen so many countries and communities go without access to basic medical care.
While innovations in genomics and sequencing are leading the pack, earning $410 million in VC funding in 2016, population health management companies are also benefiting from this trend, receiving just under $200 million in VC funding in 2016. These new companies are looking for ways to better manage the world’s population, tackling issues like prescription accuracy and management and the rising cost of healthcare services. New VC funding can make healthcare services more affordable and accessible, with an emphasis on the most remote regions of the world.
As the VC market grows internationally, startups will have more options to secure funding for their projects. Healthcare continues to be a major challenge for countries all over the world, but with more VC funding and fewer barriers in the marketplace, new companies can further develop their ideas and eventually make healthcare more affordable and accessible for everyone.