Sunday, December 10, 2023

When Silicon Valley investors try their luck abroad - Rest of World

Last updated Thursday, November 16, 2023 09:02 ET

Silicon Valley has many claims to being the center of the global tech industry, but the stickiest advantage is funding. There’s just no better place to raise money for a startup, from seed rounds to growth rounds to exit. If you can go anywhere, that’s where you go. It’s odd because we know how to send sums of money over long distances. (The blockchain solves this!) But when California investors reach into other markets and other countries, they tend to get clumsy.
If you’ve spent any time in a regional startup scene, you can probably recognize the signs of a U.S. venture firm taking interest. The biggest difference is the sheer volume of money: far more than any local fund could muster, and enough to inflate valuations to the point that no local firm can compete. One or two startups will hit it big, then the next business will end up with high expectations and few funders that can live up to them. Even startups that were lucky enough to get U.S. money may have trouble making an exit now that they’ve set the bar so high.
Then there’s the kind of startups that get funded in the first place. Picking winners from a continent away, U.S. funds gravitate towards ideas that have already found success somewhere else. In Colombia, Frubana showed you could make money connecting farmers directly to restaurants and retailers. Once the model was proven, you could try the same trick in Kenya with Twiga Foods (funded by Goldman Sachs and Endeavor, among others), and in Egypt with...

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