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Venture Capitalists around the Globe Identify Pockets of Technology Innovation

Deloitte LLP, National Venture Capital Association

July 2008
 

While venture capitalists continue to view the US as the global leader in technology development and innovation, they also recognise specific pockets of technology innovation worldwide, according to a survey by Deloitte LLP and the National Venture Capital Association (NVCA).

The 2008 Global Venture Capital Survey, which was conducted in March 2008 and measured the opinions of nearly 400 venture capitalists worldwide, found European countries are emerging as leaders in life sciences and clean technology, two of the fastest growing sectors globally. Asian countries were recognised as offering a high level of innovation in the information technology fields.

“The US maintains the top spot as the global technology leader in innovation,” said Mark Jensen, national managing partner of Deloitte’s Venture Capital Services. “While the US isn’t losing ground, the globalisation of innovation is underway. The rest of the world is finding out what they’re good at and venture capitalists recognise where those strengths lie.”

“While technology innovation and entrepreneurship have largely been a US phenomenon, other countries are quietly excelling in areas that are critical to the future of venture capital investment,” said Mark Heesen, president of the NVCA. “We are operating in a global economy and venture capitalists will follow the best technologies. Those countries that can marry the innovation and entrepreneurial work ethic as the US has done will become formidable economic competitors in the 21st century.”

Europe Shows Strength in Life Sciences and Clean Technology Sectors

According to venture capitalists, Europe is emerging as a new leader behind the US for life sciences and clean technology sectors. Germany and the UK in particular are quickly gaining recognition for their technological savvy in these fast growing industries.

Germany was recognised by 43% of all respondents as having the best expertise in the rapidly growing clean technology field, just behind the US. Other countries to receive attention in this industry included Japan and Brazil.

“Germany is the beneficiary of a well conceived, stable public policy that has ensured attractive markets for alternative energy technologies. This combined with a strong general technology base, has fostered substantial innovation in the space,” said David Prend, partner, Rockport Capital. “As a result, for example, Germany, a country with marginal sun, is a leader in solar photovoltaic technology that they export to the rest of the world. Venture capital follows quality technology and innovation.”

In the field of medical devices, 39% of the venture capitalists also cited Germany as being the second most recognised country for technology in medical devices and equipment, followed by the UK at 20% and Israel at 14%.

Regina Hodits, partner in the life sciences group at Atlas Venture, observed, “Germany and more broadly the Alpine region, has always been a home to invention in the medical device field with a strong incumbent industry base. Today, this region provides a favourable environment for medical device development based on the regulatory framework, a high degree of innovation emerging from world-class medical research institutions and experienced key human resources. Additionally, London, the Medicon Valley in Denmark and Sweden, and emerging centres of excellence in Switzerland, are hubs around which biotech innovation is growing,” she added.

The UK was identified in the second spot by 31% of the respondents as having leading technology for biopharmaceuticals, followed by Switzerland at 18% and Germany at 15%.

Asian Countries Vie for Top Spots in Information Technology

While there has been great interest surrounding the promise of China and India as emerging technology centres of the world, the US continues to be viewed by the majority of venture capitalists worldwide as the global leader in technology in all IT sectors. Yet, Asian countries consistently ranked high in information technology among all other nations.

Japan Leads behind the US in Telecom
After the US, Japan fared well in the minds of venture capitalists in telecommunications with 27% of all respondents identifying the country as having leading technology in the sector. Sixteen percent of the venture capitalist respondents named Israel as a leader in telecommunications.

“The Japanese government was one of the first to recognise the value of developing and maintaining a pervasive, high-speed broadband infrastructure throughout the country, fuelling significant innovation around the next generation of broadband applications,” said Dixon Doll, co-founder and general partner, DCM. “Today, we are seeing a new wave of entrepreneurship in the country as it relates to communications. Providers such as Yahoo!BB, who are aggressively innovating, are compelling the traditional broadband monopolies to do the same. The result is extremely healthy competition and can only mean more advancement in the Japanese telecommunications arena going forward.”

Taiwan Strong in Semiconductors
Taiwan captured the number two spot behind the US in the semiconductor industry with 31% of the respondents recognising the country as having the top technology in the world. Twenty six percent of venture capitalists named Japan as having top technology for semiconductors followed by China at 16%.

“Taiwan has executed tremendously well and has earned its leadership position in the manufacturing of semiconductors. In addition to excelling in the area of outsourced manufacturing, Taiwan has been very smart in attracting and growing talent and partnering with leading edge companies in the semiconductor space,” said Wayne Cantwell, general partner, Crescendo Ventures. “Venture capitalists generally select Taiwan as the country of choice for manufacturing their portfolio companies’ semiconductors.”

India Ranks High in Software
In the software sector, 41% of the venture capitalists surveyed viewed India as having top technology, placing it second behind the US. India was followed distantly by the UK (13%) and Israel (12%) as having strong technology in the software space.

“The maturity of the software services industry and availability of talent in the services space is India’s key strength. In some sense, the cycle of automation that took place in developed geographies in 1990s is taking place in India now. As the domestic Indian economy expands rapidly, growth in sectors such as financial services and telecom is creating demand for automation, and creating investment opportunities around lower price-performance points that are unique to emerging markets," said Alok Mittal, managing director, Canaan Partners.

US Viewed as Technological Leader among Venture Capitalists
Venture capitalists from around the world view the US as having the best technology in all sectors surveyed. The following represents the percentage of global venture capitalists that named the US as the number one or number two spot in the noted industry sectors:

  • Telecommunications – 71%
  • Semiconductors – 81%
  • Software – 91%
  • Biopharmaceuticals – 94%
  • Medical devices – 94%
  • Clean technology – 79%




As used in this document, Deloitte means Deloitte LLP. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.

The National Venture Capital Association (NVCA) represents approximately 480 venture capital and private equity firms. NVCA's mission is to foster greater understanding of the importance of venture capital to the US economy, and support entrepreneurial activity and innovation. According to a 2007 Global Insight study, venture-backed companies accounted for 10.4 million jobs and US$2.3 trillion in revenue in the US in 2006. The NVCA represents the public policy interests of the venture capital community, strives to maintain high professional standards, provides reliable industry data, sponsors professional development, and facilitates interaction among its members. For more information about the NVCA, please visit www.nvca.org.

 

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