In the July issue of Global Corporate Venturing, guest columnist Tatjana de Kerros said: “It is Saudi’s Public Investment Fund (PIF) you should be watching. And closely. Because ostensibly, it is launching the world’s largest venture capital firm [with its $3.5bn investment in ride-hailing service Uber].”
However, you need not have been watching too closely to see the PIF commit in the past month to the world’s largest corporate venturing fund, SoftBank Vision.
The PIF has a memorandum of understanding to invest $45bn through the fund, with another $25bn coming from the manager, Japan-based communications conglomerate SoftBank (see news report). The remainder of the $100bn is expected to be raised from third parties, such as other sovereign wealth funds.
The committed capital so far is the equivalent of the PIF finding another 20 Ubers to back. That indicates the transformation of venture capital to encompass far larger and later-stage entities with global ambitions.
But the $70bn is also about double the total raised by all VC funds in the US, still the world’s largest venture market, last year. Effectively, governments and corporations are increasingly defining how capital will be provided to fast-growth private companies.
The days of amateur or lifestyle VC firms managing modest amounts investing in friends’ and sons’ businesses in the local region are going away.
Alan Patricof, scion of the industry, who said at our Shift conference in New York last month he had raised $2.5m for his first venture fund 46 years ago and now manages $400m across four funds at Greycroft, represents the elegance and achievements of these founding entrepreneurs.
That the SoftBank Vision fund will be run out of London, UK, adds to the cosmopolitan flavour of the industry now. In the 1990s, 91% of deals were in the US, according to a Shift conference keynote by Venky Ganesan, partner at Menlo Ventures and chairman of US trade body the National Venture Capital Association – GCV’s partner for the Shift conference. Now it is about half, Ganesan added.
A clue to the future of venture lies in those places that are grappling most effectively with bringing together the triple helix of governments, corporations and universities with other participants in the innovation capital ecosystem, such as VCs, angels and entrepreneurs.
Once reframed from past performance to future potential, regions as diverse as Brazil (see regional report), Canada and Singapore look increasingly promising – and not just because GCV has been to them all in the past month, along with Russia and the US, to test them on the ground).
The smartest regions are not necessarily those with the brightest people but those that can organise, or network, them both locally and into the global ecosystem. Developments, such as blockchain, might even aid this globalised innovation capital ecosystem by reducing friction and increasing entrepreneurial endeavours.
The days of zero-sum nationalism, where one location does better at another’s expense, are limited. Smart insiders, whether as deal syndicates or across a whole ecosystem, look to build alliances with partners that bring complementary skills, and together build a unique competitive advantage.
In the Game of Thrones, a victor in battle can lose the war – and his life – if the opposition negotiates better alliances. It is certainly a strategy the PIF and SoftBank seem to have taken to heart.