The Economist describes in it’s article ‘VC clone home‘ venture capitalists who are making money by bringing old ideas emerging markets – and states that such a copycat business is not the real spirit of venture capital, which is supposed to ferret out and fund new ideas, not imitations. I disagree…
Venture capital is supposed to create shareholder and stakeholder returns via the commercialization of viable ‘venture scale’ opportunities. Well return is not driven by product alone – rather by the full business architecture, subsequently market selection, supply chain, etc.
As a matter of fact, market selection and go to market modeling has a tremendous impact on the chances of success – and in 50 years, the economies of today’s emerging markets will eclipse those of the developed world in size. So why would anyone believe that doing the same thing in a different market is a copycat? Under this assumption, I believe Facebook would be a copycat (not the first in social media) as would Google (not the first with a search engine). First movers, by the way, are seldom the most successful. Doing business in a new culture also demands knowhow exactly as does software development – and pursuing a business opportunity in a major growth market makes much more sense to me than not pursuing it (otherwise, why did ‘copycats’ like Chineese Alibaba.com or Baidu turn out to be extremely profitable in terms of shareholder and stakeholder returns) – or pursuing less viable opportunities on home turf.
There is no particular reason for VC to clone home, and the venture capital’s emphasis on emerging markets is a good bet on how to break the broken venture model. This is exactly how we view our business, we are strong believers in bringing businesses to the growth markets where they would have the best chance of success, and are proud to pursue an venture capital ecosystem where such a process can run as smoothly as possible.