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A Conversation on Investment in Global Markets

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Idiomatic Phrases



Question: What are the target countries for global investment?

Answer: China, India, Israel and Canada are primary target countries for U.S. venture capitalists
There seems to be a consensus among U.S. venture capitalists regarding where the most opportunities exists globally. Most of the U.S. firms who have invested globally are making investments in China, India, Israel, and Canada. However, even in these countries, the majority of U.S. venture capital companies are essentially dabbling, making only one to two investments thus far.

Question: What is the amount of capital they invest in China, India, Israel and Canada?

Answer: Allocations by U.S. and non-U.S. firms alike for the most part represent less than 5 percent of capital invested overseas in fewer than three to five deals. Recent surveys indicate that there will not be significant change during the next five years.

Question: China, India, Israel and Canada are the most attractive countries for investment according to recent studies. Is it true?

Answer: While China, India, Israel, and Canada are by far the most seductive target markets for investment by U.S. firms, venture capitalists in non-US countries have a different focus. By far the greatest contrast is among European companies.

Question: What is the amount of investment allocated to Europe?

Answer: A strong preference for investing in other parts of Europe (67 percent) and the United States (17 percent), with the remainder focused on Asia. Asian companies have a similar level of interest in the United States (18 percent), but looked primarily inward to other Asian countries (78 percent).

Question: How about the Middle East?

Answer: For the the Middle East the data shows some 18 t0 20% focus.

Question: I heard the recent data shows investors still have a desire to remain somewhat close to home and do business with cultures close to theirs. This is a continuation of conservative investment. What are the predicaments for investment more globally?

Answer: Predicaments for global investments are cited by US investors are as follows: As in an 2006 surveys, close to 60 percent of U.S. companies cited adequate deals and superior returns in the U.S. as the primary reason for not expanding globally. Next second predicament was not having adequate resources for global investment and not finding partners to invest together.

Question: Are lacking resources and partners serious enough with US investors?

Answer: This year (25 percent) than in 2006 (16 percent). It seems US firms become more experienced in overseas investing, they are developing a more realistic picture of what is required to expand globally. Given that the trend in the U.S. is to smaller investment sizes, some firms have correspondingly fewer partners and other resources to deploy towards global strategies.

Question: But I also hear nowadays many small-size US firms are willing to broaden their global investments? Aren't they?

Answer: A recent survey findings indicate this: US.will broaden their global investment at a slow pace for the foreseeable future. More than half of U.S. respondents (54 percent) expect to expand their global investment focus over the next two years, and 61 percent of non-U.S. firms also see a future in investing outside of their home country.

Question: How about larger US firms?

Answer: Larger firms are most likely to be investing outside the United States and plan to increase their overseas investment. In fact, 85 percent of U.S. firms and 92 percent of non-U.S. firms with capital management over $1 billion indicated plans to increase their foreign investments. Interestingly, among mid-size firms, 47 percent of the venture capital with $100 to $499 million capital under management are investing outside the U.S. This underscores that global investing requires additional resources and a sophisticated infrastructure in order to manage a global investment strategy.

Question: This begs the question aren't mid-size US companies have successful investments in China and india?

Answer: Yes, China has been a successful market for midsize US venture capital rather than India. india has been tapped by big-size research and development US firms. The study shows that, Europe and Israel are also a strong market for mid-size venture firms. Mid-size firms have found good deals in China, Israel and Europe.

Question: What are the primary factors venture investors to expand globally?

Answer: Among the primary reasons one is to take advantage of higher quality deal flow—particularly in the United States, China, parts of Europe, and Israel. This is especially true for non-U.S. firms. A second reason is the emergence of an entrepreneurial environment, again and notably in China, but also India.

Question: But US firms have always been motivated by entrepreneurial spirit as well. Has this changed now?

Answer: No, that has not changed at all. On the contrary, US firms, today, are more drawn than ever before to the entrepreneurial rationale for investing globally. Other motivators include access to quality entrepreneurs, diversification of industry and geographic risk and access to foreign markets.

Question: I also see in the US venture capital investors favor local US firms who invest outside the US. So is it a sort of play-it-safe investment strategy?

Answer: Yes, it's absolutely so. One way to build a comfort zone for global investing and to take advantage of opportunities abroad is to invest locally in companies with operations outside their home country, as opposed to investing directly in foreign countries. In 2007, there was a significant increase in the number of respondents who indicated that a sizeable number of their portfolio companies have a considerable amount of operations outside the country in which they’re headquartered.

Question: Where are these companies landing?

Answer: Obviously, it depends on the activity and who is making the call. Globally and among U.S. respondents, China has become the primary choice for relocating manufacturing operations. India is the primary choice for Research and Development (R&D) operations. Engineering operations tend to land in India as well, but China is also a popular location. For back office activities, again, the choice is India.

Question: What are the trends with European investors?

Answer: For non-U.S. respondents, the United States is the primary choice for R&D and engineering while European investors prefer Central and Eastern Europe for manufacturing, R&D, and Engineering.

Question: As I see R&D investigators have a lot of worries over "intellectual property" Being invested with Europe is again a safety net for European investors I believe? What are the Europeans' main concerns?

Answer: Yap. They worry over protecting their intellectual property as well as liquidity events.That's why they want to be close to top management at home.

Question: Venture capital favors companies operating globally at large scale. Tell us how they benefit from this strategy?

Answer: This strategy allows the portfolio companies (and investors) to take advantage of cost savings and access to talent in foreign markets while protecting intellectual property. There are, however, concerns that such a trend could result in the U.S. losing its R&D edge.

Question: What are some big challenges for US and non-US firms for investing in foreign countries?

Answer: Venture capital firms encounter a variety of risks and challenges abroad.
Both U.S. and non-U.S. firms perceive the U.S. as the country where the cost of complying with regulation is too high. In 2007,41 percent of non-US venture capital firms indicated this concern. 46 percent of US companies believe the cost of complying with foreign country regulations is too high.

Question: We, here in the US, create a big problem to business with litigation against business. Is it also a problem abroad?

Answer: Yes, it is. But, this years fewer companies responded as foreign litigation pauses a real obstacle. Globally, 35 percent of respondents cited this as a problem for the U.S. compared with 46 percent last year. Among non-U.S. respondents the number is also down from 36 percent last year to 25 percent this year. Given the above, it is important to note that no other impediments were significant when investors considered the U.S.

Question: Canada is a totally different ball-game regarding investment in foreign countries. Right?

Answer: Canada has to deal with concerns globally, but particularly from U.S. firms, about an unfavorable tax environment.

Idiomatic Phrases:

How about? What do you think? What is your opinion?. Example: How about a chocolate cake? This sentence means: I suggest having chocolate cake. Would you like to have a chocolate cake? How about going to movies tonight? This sentence means: I suggest going to the movies. How do you feel like going to movies? Would you like to go to movies.

A: I need an aspirin.

B: We don't have aspirin. How about Tylenol?

B means this: Would you like to have Tylenol.

How about George Bush's Georgia policies? This sentence means: what do you think of George Bush's policies for Georgia? Do you like his Georgia policies?

to be drawn to: to be attracted to somebody, people, place or idea. Example: My brother is drawn to strong women. The United States is drawn to Israel no matter what happens to the Palestinians. This sentence means the US tends to be attracted to Israel.

invest: verb. to put money in a business for profit

investment: noun. money put in for business

investment strategy: compound noun. a plan of actions and policies for making investment in business

target: noun. certain type of people or purpose for business investment; Example: My company's target is India for biotech research. The target for this investment is middle class home buyers

venture capital: compound noun. investment money for business

venture capitalist: business man or woman who invests in business

enterprise: noun. a business to earn profit

venture capital companies: compound noun. financial companies investing in business enterprises

allocation: certain amount of money put aside for investment (in this topic)

deal: a business settlement. Example, We have got a good deal out of this investment. This sentence means: We have got what we expected to have and we are satisfied with what we got out of this business.

profit: money made out of a business deal

trend: noun. a new way people follow in a field, area, business, science. Today's trend in investment is short-term investment.

deploy: verb. to provide for business certain things like capital, labor.

midsize company: a company with less 10 million dollars investment

large company: a company with more than 10 million dollars investment

intellectual property: intellectual work produced by a person or group of people. Example, I have written this novel; it's my intellectual property.

liquidity noun. assets turned into cash in case of bankruptcy or going out of business

entrepreneurial environment. compound noun. Investment friendly environment. For the US, China has become an attractive entrepreneurial environment.

entrepreneurial spirit; compound noun. having entrepreneurial beliefs, mind

diversification: noun. putting money in different types of markets, products, services to help to decrease risk and earn more profit.

industry: one type of business: Example, Car industry

regulation: rules for business made by government (in this topic)

research and development US firms: United States firms that invest in research of pharmaceuticals, biotechnology, and green technology, hightech, and etc.

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