Global innovation is bigger than Silicon Valley
Not all VC’s are equal, but the majority of them are still human and as such suffer the frailty of not being able to be in two places at once. They relate to or prefer to be on familiar ground in their surroundings as well as in their preferred target investment sectors. This limits the global opportunities and requires structural change in the industry if a high ROI is to be achieved.
The human bit has a lot to do with being on boards of directors and travelling to the companies they invest in. If you consider the cluster mentality of investing locally, or at the very least investing conditions based on an investee company moving to a cluster area (i.e. Silicon Valley) means that companies who want investment had to move to the investors.
This is perfectly natural if you have 15-20 companies to oversee and you want to manage them it is natural to seek to have them locally or at the very least regionally rather than look further afield.
I refer specifically to the professional service structure of the VC community. Unlike Accountancy or Law firms where you can have multiple partner offices in many cities operating independently, but collectively responsible, VC’s could look to form such structures where the core is not necessarily limited to local or regional offices. To achieve this they need to think in terms of McKinsey, Accenture, E&Y or even the Airline industry “Star Alliance” as a visual illustration of collective responsibility whilst remaining independent.
There is enough due diligence undertaken in the VC sector so finding the right partners cannot be that difficult.
This is not the same as participating in syndicated deals which they do already. There is plenty of scope for such operations. The VC world has changed very little over the last few decades. They are still very proprietary small operations and could themselves achieve economies of scale if they franchised their business model. They could gain access to local knowledge without risking be cut out of a good proportion of any deal and more importantly allow for local culture issues to be resolved locally.
Instead of demanding cultures in growth companies comply 100% to “cluster” based culture places such as Dublin, Warsaw, Zagreb and Prague may not be Silicon Valley, but they are a hive of technology innovation.