Building technology companies, Forum

Global Technology Innovation & Early Stage Cross-border Investing

Anik Bose, BGV General Partner shares his perspective on global technology innovation and the implications for early stage cross-border venture investing. Silicon Valley remains the center of the technology universe with an established major technology ecosystem with companies such as Google, Intel, Cisco, Salesforce, Facebook, Oracle and Palo Alto Networks anchored in the area. While the cross-fertilization of ideas and innovation created by such an ecosystem is difficult to replicate, innovation continues to emerge from other parts of the world such as Israel, China, UK, France, Japan, India and Korea. A few key data points:

  • Israel has successfully established itself as “Startup Nation” – Ranked first in the world for innovative capacity by the IMD Global Competitiveness Yearbook 2014 and third for innovation globally out of 148 economies by the WEF Global Competitiveness Yearbook 2014–2015. The region has established an enviable track record of technology innovation in the sectors of cybersecurity, cloud and mobility.
  • China’s tech savvy consumers are propelling advances in Cloud adoption, IoT and autotech and are rapidly emerging as the only region outside Silicon Valley that has the benefits of scale and the aspirations to be a significant player on the global technology landscape. Ecosystem players like Alibaba, Tencent etc are playing a key role in fertilizing technology innovation in the region.
  • UK – London has a higher density of startups than any other city in the world with Fintech deals experiencing a five year compounded annual growth rate of 74%
  • France has the second largest VC ecosystem in Europe (US$1.2 billion in 2013) and has produced strong innovative startups in the areas of Analytics, IoT, Adtech and Drone technologies
  • India has launched several initiatives to promote the growth of the technology sector including Digital India, a $2Bn technology catalyst fund, and an ambitious plan to build 100 smart cities, which will push the innovation paradigm for technology companies.
  • Japan is setting new standards in Robotics with a focus on integration of the artificial intelligence sensors, software and big data.
  • Korea is fortifying its technology economy with promising technologies such as 5G telecommunications, realistic media and content platform devices
I believe that this emergence of global innovation hubs represents a unique opportunity to build strong technology companies – ones that practice the mantra of “Innovate locally, Scale globally.” These companies pick the best talent from the appropriate region to gain competitive advantage and then connect with the Silicon Valley ecosystem/US market to scale the business. Startups are able to find extremely talented engineers with advanced degrees able to help build early products. But in order to reach the global markets, connection to Silicon Valley is absolutely essential to these startups – for scaling growth (organically or via eco system partnerships) and brand recognition.  As LinkedIn co-founder Reid Hoffman writes in his blog – Expertise in scaling up is the visible secret of Silicon Valley (link), connecting with Silicon Valley allows cross-border startups to scale market reach in addition to scaling technology quickly and cost effectively based on the inherent advantage of their non US R&D teams.. BGV has the global company building/scaling experience as well as the experience of assembling global investment syndicates and building distributed management teams across continents and cultures – the competency required to build successful cross-border technology companies. The firm possesses this experience and DNA by design and by strategy and is a competency that is difficult to replicate. We believe that this is an increasingly relevant source of competitive advantage because of the dynamics of global innovation outlined earlier in this blog.. At BGV, we have successfully helped technology companies from China, Israel, Western and Eastern Europe and India scale up. In 2014/15, BGV has invested in Ayehu (R&D in Israel), Profitect (Developed its core analytics algorithms in Israel), Grid Dynamics (R&D in Eastern Europe), Survela (R&D in Spain), Intellivision (R&D in India and Russia) and Identity Mind Global which is growing rapidly in China. All these companies are headquartered in the US but leverage cross-border innovation.  We firmly believe that this trend of global innovation represents a unique opportunity to build new generation of enterprise technology companies. Every BGV partner is an immigrant who has participated in building global technology companies and as a consequence we tend to view early stage cross-border investing as an opportunity not as a risk.