Regional Venture Capital Business Models

Download nijhawan_presentation_to_necina_sep_2008.pdf

I was invited by the New England Chinese Information and Networking Association (www.necina.org) to speak at their annual business plan competition kick-off. About 150 people showed up on a gorgeous early fall day. My talk was about regional differences in entrepreneurship and venture capital within the US and around the world (see the attached presentation). I was approached by many young entrepreneurs and MBA students after my presentation. Although the audience was quite similar to www.tie-boston.org audiences, I was struck by how many women attended. Other observations:

• Many of the young entrepreneurs and MBA students were from mainland China not Hong Kong or Taiwan.
• There was considerable enthusiasm from young entrepreneurs for iPhone applications.
• Many in the audience were surprised by data on the impact of immigrant entrepreneurs in the US.
• Many wanted to raise money from US venture capital firms rather than purely Chinese VC firms.
• There were two young entrepreneurs from Africa: Cameroon and South Africa and we had a lively discussion about entrepreneurship in Africa. One was searching for a business idea to take back to Cameroon, but was concerned that there were no VCs in Cameroon. I mentioned an article I had read about an entrepreneur in Ghana who had cultivated a stand of trees to provide renewable products. The business model was brilliant and he was seeking $10M in London to expand by purchasing more forested land. The other entrepreneur wanted to raise money for South African startups in Boston. Seems like a ripe opportunity for a VC firm to establish an office in Africa.

The growth of global VC firms with regional offices continues. Boston area VCs have been quite aggressive in setting up offices first in silicon valley, then India and China. Highland Capital is even setting up an office in Europe. These regional offices have sufficient ability to modify their focus for the region they are in but follow the same investment selection and management process as headquarters. An example is Matrix India which is focused on investing in consumer-driven companies, unlike Matrix Boston which made most of its returns on telecom technology companies. Matrix India has invested in a fast food chain and a company that brings luxury brands to India. Boston area VCs have had offices in silicon valley for years but it is odd that most silicon valley firms don't have offices in Boston, I wonder why? It seems to me that aggressive early stage silicon valley firms would be welcomed by entrepreneurs in conservative Boston.

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