and often pre-product, at the time of investment and therefore bear substantial
risk for the VC investor. However, successful VC investments can yield atypical
returns, often outperforming other asset classes (such as private equity, public
markets, real estate, etc.) and major global indices several times over.
Many global VC investment trends originate in the Silicon Valley/San
Francisco Bay Area of the United States due to a confluence of factors, including:
(i) the region's long-standing history in technological and thought leadership, (ii)
a high-concentration of entrepreneurs, academic institutions, and venture capital/
private equity funds, and (iii) numerous leading technology companies having
headquarters or large operations in the region. Other regions have also become
thought leaders in certain technology areas, for example, Taiwan in fabless
semiconductors and design manufacturing or Israel in defense-related and
security technologies. None-the-less, Silicon Valley remains the nexus of start-up
technology and VC investment.
The global VC ecosystem is in the middle of a much-needed correction
and normalization period. Key indicators of this correction include a healthy
slowdown in investment velocity, increasingly pragmatic valuations for early-stage
investment rounds, mergers and acquisitions or public equity buyouts driving
more VC liquidity than initial public offerings, and an increased focus in cross-
border investing. These combined factors are driving a return to a healthy VC
Ecosystem with long-term viability.
Investment Velocity
The most recent decade of VC investment has been heavily impacted by
global economic crisis of 2007-2009. VC, like other asset classes, saw a massive
slowdown in investment velocity during this time while limited partners, family
offices, endowments and sovereign wealth funds withdrew from the market. This
led to a substantial build-up of investable capital as cash "sat on the sidelines"
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