U.S. Faces Competition in Wireless, Internet, and Biopharma, Says 2008 Venture Capital Survey (and One Local Investor)
Let’s take a global view of innovation. The Boston and San Francisco clusters may anchor the U.S.’s dominance in biotech, but Europe is gaining ground—and in areas like telecom and clean energy, there is already strong competition from both Europe and Asia.
That’s the news today from the 2008 Global Venture Capital Survey, conducted by Deloitte LLP and the National Venture Capital Association (NVCA). The annual survey measured the opinions of some 400 venture capitalists worldwide. The aim was to recognize distinct pockets of technological leadership and to track where investments are flowing worldwide as a measure of the globalization of innovation.
First, a quick overview. The study found that VCs around the world still view the U.S. as being at or near the top in all the tech sectors surveyed—as evidenced by the percentage who rank the U.S. number one or two in various industries: telecom (71 percent), cleantech (79 percent), semiconductors (81 percent), and especially software (91 percent), biopharmaceuticals (94 percent), and medical devices (94 percent).
Drill down a bit and you find more interesting trends. Telecom is still seen as being dominated by the familiar top five: the United States, Japan, Israel, Finland, and South Korea. In cleantech, the United States was ranked number one by fewer respondents than either Germany or Japan, so there might be cause for competitive concern there. In software, the United States is still perceived to be dominant, but the U.K. (and Europe more generally) is coming on. And biopharma is still dominated by the United States and Europe—with the latter making some gains—and no Asian countries rank in the top five.
The stats and figures weren’t broken down by U.S. region, but there are a couple of booming areas that should be of interest to local entrepreneurs and investors. The first is telecom and entertainment in Asia. Just to give an idea, in Japan last year, five of the top 10 bestselling novels were marketed primarily for reading on mobile phones. And the total number of people in Asia involved with “virtual world” gaming is something like 20 million, a group that’s producing some $15 billion in services annually. If they were a country, they’d rank in the world’s top 100 for GDP.
So U.S. investors are following the Asian infotech scene very closely. “The biggest advantage of all is they know how to build services optimized to local users and culture,” said Dixon Doll, a general partner at Silicon Valley venture firm DCM, in a press conference about the venture survey.
Meanwhile in biopharma, most of the assets are still going to the United States and Europe, roughly in an 80-20 proportion, said Jean-Francois Formela, a partner in the life sciences group at Waltham, MA-based Atlas Venture, also in the press conference. Here’s how he sees the situation: “You look at the clusters of excellence in companies that are driving activity. Boston and San Francisco are equivalent in terms of the number of companies—they both have roughly 250 companies, 60 public. The next largest global cluster isn’t in the U.S., it’s in the U.K., in two regions—Oxford and Cambridge [in the southeast], and Manchester in the northwest, with about 30 public companies.”
After that comes another European cluster, near Basel, Switzerland. For a successful cluster, Formela says, “You need a critical mass of academic researchers, entrepreneurs, venture capital, and industrial partners. In Europe, pharma has been big, while in the U.S., the entrepreneurial component was much stronger. But the entrepreneurial gap between Europe and the U.S. is closing very rapidly.”
And it’s not just in biopharma. “What we see at Atlas is it’s changing rapidly on the tech front,” says Formela. “We see a big change in this decade from last. Now in wireless and consumer Internet, it’s very interesting. The online spent in Europe is bigger than the U.S., and wireless is 30 percent higher than the U.S.” In terms of building a company, he adds, “You can stay in Europe, you can find entrepreneurs, investors, and more importantly find the market. They don’t stop by the U.S. for any components. In the next 10 years, we’ll continue to see higher growth in Europe, and the currency has an effect.”
Boston (and the rest of the U.S.), take note—sounds like it’s time to raise your game.