Much has recently been written about the VC trend of decoupling of capital from geography and the ease of VCs investing in far-flung startups from the comfort of their offices in Silicon Valley. A report in Forbes expounds on this trend, claiming “this decoupling of geography from financial and human capital… has proved that location doesn’t matter so much as expertise, empathy and connection with founders.” Anik Bose, General Partner at BGV, shares his perspective on the opportunities and challenges around this trend.
Context
Decoupling capital from geography is a trend that has been fueled by a confluence of factors including:
- The continued growth of innovation hubs outside Silicon Valley including those in Western Europe, India and Israel.
- A vast increase in remote work interactions as a consequence of the pandemic.
- Rapid adoption by the VC industry of collaboration tools from companies like Zoom and BGV’s own Lifesize.
- Many business leaders say that this trend promises to transform the VC industry by providing VC firms with the ability to cast a wider net for opportunities instead of being constrained by a narrow geographic filter.
BGV Perspective
As immigrant entrepreneurs to Silicon Valley, BGV partners, from around the world, have faced all the challenges in building iconic global companies spawning the internet, smart phones and internet telephony. As global entrepreneurs turned venture capitalists, we have an intimate understanding of the cross-geo start-up journey – we have lived it. At BGV our deal-sourcing strategy has been global from day one. We began in 2006 with a bias towards startups conceived in Israel and have since expanded to innovation hubs in Western Europe and India. Over the past 14 years, BGV has consistently cast a wide net for opportunities, with the conviction that global optimization yields better returns than local optimization. Today, 65% of our portfolio companies are from innovation hubs outside Silicon Valley — so de-coupling capital from geography is not a new concept for us.
We believe that while technology-enabled casting of a wider net is necessary, it is not a sufficient condition for early stage VC success given that 75% of VC-backed startups fail. We maintain that while decoupling capital from geography is a valid trend, discussions have missed one important point: it is not enough for a Silicon Valley VC to realize they can make investments in companies started thousands of miles away from the comfort of their Silicon Valley office, sight unseen; these VCs will also have to build the competencies needed to partner with global entrepreneurs to grow a cross-border company and weather the inevitable crises that are encountered along the journey.
We believe that the implications for post-investment value creation challenges for early-stage investors should not be underestimated. These range from helping entrepreneurs navigate the crucial objectives of market validation and product-market fit in markets thousands of miles away from their homes, to hiring and building cohesive company cultures spanning multiple geographies while building trusted syndication relationships with local VC firms. The recent cross-border playbook blog, written by my partner Eric Buatois, provides an in-depth perspective on this topic. At BGV we believe that providing such value add, sight unseen is far more difficult than wiring an equity check to a foreign bank.
Conclusion
We have designed BGV to do much more than simply finance portfolio investments. BGV provides the experienced human capital and insights that global cross-border entrepreneurs require to increase their odds of success. We have been fortunate to work with talented entrepreneurs who have helped us pioneer the competencies and shape the playbooks needed to be successful in this new era. To learn more, please visit www.bgv.vc
