Emerging markets 'hot' for VC, says KPMG
to remain hot destinations for venture capital (VC)
investments this year, according to a recent survey by KPMG.
"Globalization and the focus on the health of the planet has VC investors concentrating heavily on capturing emerging market opportunities, particularly in Asia", said Packy Kelly, co-leader of KPMG's venture capital practice in Silicon Valley. In polling more than 350 venture capitalists, entrepreneurs, corporate buyers, investment bankers and research analysts, KPMG found that outside of the US, China and India were the overwhelming favourite destinations for investment, chosen by 29 per cent and 23 per cent of respondents, respectively. Moreover, 64 per cent of those surveyed indicated the two countries are also the most attractive locations for entrepreneurs to find funding, while 61 per cent said they expect the pair to have increased initial public offering (IPO) activity over the next two years. "There is a clear indication that growth investors have become more global, spreading their capital worldwide", said Kelly. "Not surprisingly, they continue to be bullish on emerging markets and industry sectors that project the most growth in the near future." On an industry level, the KPMG survey revealed that greentech/cleantech businesses were expected to receive the most capital over the next two years, with the biotech/pharmaceuticals industry was tipped to be next in line for the cash. Investors are looking for "the next-best-thing in eco friendly and medical technologies," said Kelly. As a whole, 34 per cent of respondents believe that investment activity will at least remain the same in the coming year, while less than 12 per cent anticipate a decrease in investment volume. One such example of this deluge of investment is Bridge Laboratories, which over the past year has attracted three rounds of VC funding, totalling $57m. The US firm's strategy involves delivering preclinical services in China at "significant savings", while providing a US-based service for clients that prefer this option. It has been using the funding largely to bolster its China operations and capitalise on a growing opportunity in the country. Meanwhile, KPMG said that the investment community as a whole is changing, with VC firms experiencing increased competition from private equity and hedge funds as they look for new ways novel strategies to position their capital in innovative companies earlier on. "We are seeing continued convergence between private equity and venture capital," said Brian Hughes, co-leader of KPMG's venture capital practice in Philadelphia. "Venture capital funds are adding private equity investments, and private equity funds are adding venture capital investments blurring the lines between the asset classes."