OBSERVATIONS AND INSIGHTS




2021-10-06

WHERE DO VCs INVEST?

Recently I was looking at the OECD* organisation's statistics of Venture Capital (VC) investments across their member and other selected countries. Looking at the numbers gives one image of where VC investments are made, but putting the numbers into graphs** highlights some of the more interesting facts.


A fact that is well known is that the US is the largest country for VC, where most deals take place, but also where competition for deals is highest and also likely the place with the highest valuations. With the OECD's data, the US VC investments outweigh the rest of the OECD+ (all the countries part of the OECD's Venture Capital database, excl. the US) by x6. The same comparison with the 2nd largest country, the UK, the US outweighs the UK by x40! Clearly, without any doubt, the US plays in a separate league where the size of its VC investments dwarfs everyone else's, even in aggregate numbers.




Now, if we exclude the US and look at the rest of the countries in the OECD database, we see that the UK, Germany and France are major VC investment countries, together with Canada, Japan and South Korea. Of course, there are other countries, such as China, being major countries for VC investments - but in this short blog, I've only looked at the OECD database.




Looking at the different stages of VC investments (seed, startup, late), seed investments alone in the US outweigh the aggregate of all stages of VC investments in countries such as Germany, France and the UK - which are some of the largest VC investment countries part of the OECD database.




So where does this leave us? For one thing, the facts raise questions such as:

  1. Why is the US outweighing the other countries by such a large factor, even in aggregate numbers? Is it a matter of capital markets more suited to VC investments, is the infrastructure for VC investments better, are the more opportunities in the US, is competition and valuations so much higher in the US, or is the culture and mindset toward VC investment better?

  2. As a startup outside of the US, could it be worth moving to the US and thus have better chances of raising capital for the business?

  3. As an investor outside of the US with a portfolio of companies, could it be worth moving the portfolio and the businesses to the US to improve valuations, infrastructure quality and exit opportunities?

  4. As a US VC investor, given the competition and valuations in the US, could it be worth looking at sourcing investments outside of the country?



* The Organisation for Economic Co-operation and Development (OECD) is an international organisation that works to build better policies for better lives. OECD member countries include Austria, Belgium, Canada, Denmark, France, Germany, Greece, Iceland, Ireland, Italy, Luxemburg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, United Kingdom, United States of America.


** Please note that these figures stretch up to the year 2019. We know that 2020 was a good year for Venture Capital, but as the OECD database only does not have all the figures for 2020 yet, the graphs I made stretch until 2019.


To access the OECD database, click here.