VC away from home

As the venture capital industry goes global, an old VC shibboleth is gradually being demolished.

?We never invest in a company more than an hour's drive away.? The original logic behind this rule was very sound ? early stage companies are fragile and require constant monitoring. A prudent venture capitalist, like a farmer, doesn't want to be far away from his fields.

But changes in the VC industry are now challenging the hour's-drive rule. First of all, there is no plot of dirt within an hour's drive of Menlo Park that isn't extraordinarily expensive, and therefore not always conducive to building an early stage company. Venture capital has therefore gone much further, geographically speaking, in search of hungry entrepreneurs. This search has helped second-tier VC hotspots like North Carolina's Research Triangle and Madison, Wisconsin attract more early stage money, much of it from Silicon Valley and Boston-based firms.

Local governments across the US couldn't be happier with this development. In this issue, Rob Kotecki presents a round-up of the various initiatives US states are undertaking to build their very own Silicon Valleys, many of which have carefully studied the California and Massachusetts models.

But VCs are needing to fly a further than Madison to capture the best opportunities of the new millennium. Early stage technology companies located anywhere in the US or Western Europe often need to have an Asia strategy right out of the box, and this often means having operations in India or China. Silicon Valley venture firms that only a few years ago were poo-pooing a Boston office are now establishing operations on the other side of the Pacific out of a fear that they will miss not only the best opportunities to make money but possibly the only opportunities for true venture-style returns.

In this issue of PEI Manager, Jennifer Harris looks at the challenges that venture capital firms have experienced in taking their relatively lean operations to new countries. We hope you get some good ideas for your own firm, which no doubt is facing similar issues as you expand.

Enjoy the issue,

By David SnowDavid.s@peimedia.com