How can you drive venture capital growth in emerging markets?

In the local context, it's important to assess the strength of the investment ecosystem on the whole. Which of its stakeholders are present? Startups, but also Financial Advisors, Investment Consultants, Investors, Funds, Accelerators, Legal, Incubators, Accountants... and then the cohesiveness of the local context is predicated on the willingness and ability of the different actors to collaborate and support each other: are there regular industry networking events to bring them together? Are people well-connected across LinkedIn, X, or Discord? Are cold emails ever getting answered? etc.

The development of venture capital markets in emerging countries requires both direct and indirect government intervention. Indirect intervention requires public capital to be provided to venture capital funds, while attracting adequate private capital. Indirect intervention should create a favorable ecosystem for venture capital funds and enterprises in the form of a friendly tax and administrative and regulatory system. In order to strengthen the supply of innovative companies, government should support research and development, e.g. by launching grant programmes. The simultaneous launch of all these tools will ensure the development of the venture capital market.

Drive venture capital growth in emerging markets: Identify untapped opportunities, mapping potential sectors. Tailor investment strategies for local market nuances. Foster local partnerships for insights and access. Support early-stage startups, aiding their growth. Could you offer mentorship, network connections, and resources? Mitigate risks by diversifying investment portfolios. Collaborate with the government for favorable policies. Organize events to showcase startups, attracting interest. You can encourage cross-border collaborations for scale. Measure impact and refine strategies for sustained growth.

You could look at how many startup waves that local markets had gone through. Was there any successful exits and how the founders of those initial waves doing now? (started new companies, become angels, running their own funds, ..) Then how the talents (in tech) being developed or grown, either through homegrown startups or maybe through the global/regional tech companies entered the market. Large talent pools would accelerate the next wave of startup success.

Today we've marquee angel investing platforms which support new-age entrepreneurs, providing them capital by connecting them with a diverse group of investors. The beauty about these platforms, it provides investors an ability to start with small investment however still make meaningful contribution to the startup community.

Relationships build trust. It's important to always seek to add value even during an intro call. People remember those who are kind and understanding that clearly have knowledge. Establishing a personal brand around this will create the right noise to then connect the right people together. All of this, builds trust and is fundamental to relationships

Building a network in an emerging market begins with angel investors that are active in the ecosystem, comfortable co-investing, and who have deep connections across the ecosystem. It's also valuable to identify regional and global VCs and angel groups that are active in the emerging market. They will give insight on doing deals, opportunities risks, and key local players. They can also co-invest and share pipeline and due diligence.

It takes more than money to break into emerging markets. The less developed the economy the more nuanced the local ecosystem. Billions has been lost by successful startups & VCs trying to break into the Indonesian ecosystem by themselves. Finding the right partners makes the difference between being sidelined or having pathways open up.

Venture capital thrives on relationships. Establishing a robust network of local partners, mentors, and ecosystem players is paramount. These connections serve as a wellspring of knowledge, resources, and opportunities. Collaborating with accelerators, universities, and industry associations enhances access to talent and markets. Through these connections, we bridge information gaps and cultivate trust, key elements in the success of VC endeavors in emerging markets.

This involves establishing relationships with local entrepreneurs, investors, and industry experts to gain insights and access to promising investment opportunities. A robust network facilitates knowledge exchange, fosters partnerships, and enhances deal flow quality. It also provides a support system for portfolio companies, offering mentorship, market access, and operational guidance. Networking events, industry associations, and local business incubators can be valuable channels for expanding connections. Additionally, collaborating with other VCs can lead to co-investment opportunities and shared expertise, further strengthening market presence and investment success.

Almost all VCs are good at understanding local context and building networks. But all said and done there is inherent risk in investing. Also asking VCs to lower expectations or hold out longer may not be suitable, so to me its diversification and driving consolidation (unlock talent and synergies to build scale and fast track profitability) are two pillars that could work. In emerging markets there is a lot of talent and opportunity which is hidden and needs to be unlocked

It’s seldom about currencies. It’s always about solutions and people in those regions. Uber has stunning success in emerging countries and is sometimes kicked out of the best ones.

VC in emerging markets requires patience, long-term perspective and fundamental vs trend-driven investment approach (which is prevalent in established markets like US). Additionally, the dominant exit strategy in emerging markets is still M&A - this has to be considered during deal / revenue multiples / valuation negotiations

While adaptation is true and required, you first have to decide if you are willing to do so. For example, in certain countries like Bosnia + Herzegovina you can't do SAFE agreements and it's hard to get money out of the banking system. Yet, there are incredible companies and talent in the country.

Adapt your investment strategy but never compromise on your standards because at the end of the day, world-class startups, founders and VCs will win.

As we've seen in the last few years, this is the single most important aspect of the modern VC, and the right wrap-around support is critical. For example, Active Impact Investments focuses on post round support including access to a deep pool of key talent for companies as they unlock growth

Venture capital in emerging markets isn't just about capital injection; it's about nurturing growth. We must offer invaluable support to portfolio companies, encompassing mentoring, training, and strategic guidance. This entails helping startups overcome common challenges such as scaling, talent acquisition, market expansion, and compliance. Fostering an innovative culture and encouraging collaboration within the ecosystem are essential elements of our role as VCs.

Yes, agree but definitely think our experience working daily with our EM companies provides us a relevant POV to help add value and create culture with our partners. Not from a mountain top but as a true partner, I spend more time working with people in EM then working with people in developed countries. I have made great freinds and great business partners.

Also be mindful that your value-added support might not always be relevant in the local context. Some mentoring and advice that works in the first world may not be practical or relevant in the third.

This inolves going beyond financial investment to offer strategic guidance, operational expertise, and market access to portfolio companies. This can include mentorship, networking opportunities, talent acquisition support, and assistance with regulatory compliance. Tailoring support to the specific needs and challenges of each startup in the context of the local market can significantly enhance their growth potential and sustainability. By actively participating in the development and scaling of these companies, VCs can improve investment outcomes, foster innovation, and contribute to the overall ecosystem’s maturity, leading to increased opportunities for successful exits and further investments.

In Asia, also check out BackScoop. In person, connect with local business networks and social clubs to learn from the insiders.

Outstanding places to look at news and information on the VC landscape include: Techcrunch+, Impact Alpha, Venture Capital Journal, Private Capital Journal, Cause Artist, BNN Bloomberg amongst others - who would you add? Also look to regional and local news sources like BC Business, Vancouver Tech Journal and others.

Venture capital in emerging markets is a dynamic field that necessitates continuous learning and adaptation. Drawing inspiration from the best practices of successful VCs, investors, and entrepreneurs operating in these regions is pivotal. Staying informed about trends, insights, and opportunities in the VC landscape, and actively contributing to the knowledge-sharing within the VC community, ensures our collective growth and the sustainable development of emerging markets.

Learning from best practices involves analyzing successful strategies and adapting them to local contexts. This includes studying the investment patterns, exit strategies, and portfolio management techniques of successful VCs, especially those with a proven track record in similar markets. Incorporating lessons on risk assessment, market entry, and operational scalability can improve decision-making and investment outcomes. Engaging with global VC networks to exchange knowledge and experiences can also provide insights into innovative practices and emerging trends. Continuous learning and adaptation ensure that VCs remain competitive and can effectively capitalize on the unique opportunities presented by emerging markets.

Catalyzing growth in an ecosystem is often about having the right stories to have as role models and to share for validation. Look to amazing examples like i2i Ventures, Teja Ventures, Africa Eats, and Katapult who have amazing stories to tell and progress to demonstrate.

Kick starting a VC culture on a market may require government intervention. How do we encourage the typical investors in VC funds to invest in early stage in emerging markets? This is often outside of their risk portfolio. This can be alleviated in part by government matching funds, where the non-gov funds receive superior returns. The IIF programme in Australia did a good job establishing small funds, who in turn helped create an ecosystem of start-ups that then encouraged or enabled larger funds to be established. IIF matched private funds 50/50 in a competitive process. The market will need to be a low corruption market with a stable banking system.

In conclusion, the journey to drive venture capital growth in emerging markets is a multifaceted endeavor. It requires a deep understanding of local nuances, a robust network, adaptive strategies, hands-on support, and a commitment to continuous learning. By embracing these principles, we can harness the immense potential of emerging markets and pave the way for innovative and impactful investments.