The maturation of the U.S. Internet economy and rapid development of online industry in other countries is pushing venture capital investors overseas, as they increasingly export American money and industry pinning their hopes on replicating successes in now-burgeoning territories.
As top Internet brands’ user bases and valuations push companies closer to exits for their early investors, American VCs are looking overseas for attractive growth-stage investments to create web industries in developing nations. With the global economy rebounding and the Web infrastructure expanding in countries with populations that dwarf the U.S.’, venture capital firms have begun charting ambitious international plans.
“We’re finding more international opportunities today than we were five years ago,” said Insight Managing Director Deven Parekh.
Parekh said Insight, which gravitates toward Internet and software investments, isn’t putting any specific commitment for deploying its $2 billion, which will be used in separate funds for both early- and late-stage deals. However, Insight already has holdings in Asia and this smaller sliver of the VC firm’s portfolio is bound to grow. Other investors are also looking east with their latest funds include: Accel’s, which teamed with IDG and tapped into China with more than $1.3 billion; Sequoia Capital, which aims to do the same; and, Bessemer Venture Partners, which has its eye on India with a portion of its $1.6 billion war chest that it just raised.
Late last week, Bessemer Venture Partners announced it is closing its eighth fund with $1.6 billion, and that it will pursue investments in India with as much as a quarter of it. The VC firm took on capital from Mumbai in its latest fund, it said in a statement, without specifying the individual or organization providing backing. Existing investments for Bessemer include LinkedIn, now awaiting its IPO, and Skype, another oft-mentioned candidate to go public.
LPs’ renewed commitment to the asset class comes as VC-backed IPOs kick off 2011 with a solid start, stoking optimism that private stock trading on secondary exchanges will make its way to listed equities markets. Specifically, the performance of some of China’s IPOs on American exchanges have given investors cause to be optimistic.
However, facing an influx of capital to the region, VCs must be cautious to retain talent. Michael Li, Joe Zhou and Forrest Zhong are among the defectors from KPCB’s Chinese team, and despite the VC’s clout in the region and in the business, it faces a challenge in the absence of some of its most prominent executives.
That challenge is less likely to present itself to Accel Partners. The VC just teamed with IDG Ventures to raise a pair of funds totaling $1.3 billion that will separately seek out growth investments and late-stage deals. IDG is among the early backers of Baidu, China’s equivalent to Google that saw its value soar in the months during which Google’s executives tried to fight Chinese regulators demanding further controls implemented on the search engine. Accel and IDG have already teamed together on deals and have multiple offices in China.