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Venture Capitalists Prefer United States
by Winter Casey
The United States remains the world's center for investment, according to research from the Deloitte & Touche consulting firm.
"The United States remains the primary investment target for [venture capitalists] around the globe," Mark Jensen, national managing partner of Deloitte's Venture Capital Services, said in a statement. "From a venture-capital viewpoint, the perceptions of a brain drain from the United States to China and India are simply not true. The majority of VCs surveyed worldwide, including those based in the United States, still believe the United States is the best bet for entrepreneurial success."
Jensen made his remarks in the introduction of a survey released in July by Deloitte & Touche and the National Venture Capital Association. The research found that the United States boasts the world's friendliest climate for VC investment and startup companies.
Close to half of U.S.-based VCs surveyed do not plan to expand globally within the next five years, while 58 percent of foreign VCs are interested in international expansion, according to the findings. Most VCs worldwide continue to target technology sectors, the report said.
The survey also found that cross-border strategic alliances by VCs are growing. The majority of respondents said they are looking to China and India for future investment. However, the appeal of those countries is lessened by their poor protection of intellectual property, physical distance, the effort required, and the lack of a strong understanding of the local business environment.
Morgan Reed, executive director of the Association for Competitive Technology, also said onerous labor laws serve as a deterrent in other countries for potential VC investment.
Reed reaffirmed that the United States is the best country in the world for innovation and venture-capital investment. He said the European Union, South Korea and some Latin American countries have taken a wrong turn recently by embracing shortsighted, anti-innovation policies.
The research said VCs in the United States have been challenged by the threat of legal action and burdened by the high cost of compliance with government regulations. But Reed said small businesses in the United States benefit from a strong legal system that offers certainty and a university system that allows technology transfer.
Some have complained that compliance with a 2002 accounting law designed to curtail corporate fraud has been costly. Others said the law was needed. Laurence Hazell, a director of governance services at Standard & Poor's, argued that the law demonstrated vulnerabilities in U.S. policy.
But Mark Heesen, president of the National Venture Capital Association, said, "Regulatory barriers to investment are increasing in the U.S. while falling in other regions."
A June 2006 report for the London Stock Exchange and the City of London commissioned by Oxera Consulting found that the "rise in U.S. compliance costs [with the accounting law] has ... increased the competitive position of the London markets."
In terms of the legal system, Hazell said companies have easier access to U.S. courts, but some said the nation has a strong appetite for litigation. Still, Hazell said countries like China have done as much as possible to establish solid corporate law but lack enforcement to back it. He also said England generally supports more "principles" while the United States opts for rules.
According to the annual Ernst & Young venture-capital report, the United States, Canada, Europe and Israel comprised 93 percent of venture capital invested in 2005. The other 7 percent was invested in China and India.
The firm found that many investors believe that the challenge of meeting U.S. regulatory requirements and the increased bar to listing on the Nasdaq stock exchange are creating new interest in listings on global exchanges such as those in Hong Kong and Tokyo.
Another study from Ernst & Young found that a key trend in 2005 was an increase in companies opting to go public in China, Israel, Poland and Russia. The consulting firm forecast that in 2006 more interest would be shown in markets such as Brazil, India, the Middle East and South Korea.
Meanwhile, a study by Stanford University and released by The Manufacturing Institute touts the benefits of security investments for the global supply chain. The study said that companies that invest in such measures can expect benefits greater than the costs.
Thailand, Malaysia Discuss Cell-Triggered Bombs
Thailand officials plan to meet with their Malaysian counterparts to discuss ways to reduce the number of bombs detonated remotely by mobile telephones.
"We have registered nearly 90 percent of cell-phone users nationwide," Chidchai Vanasatidya, a deputy prime minister of Thailand, said in a statement. Still, cell phones have continued to be used as bomb tools from across the region, killing government officials and local residents.
In other news, India's Finance Ministry is requiring all government departments and public companies to use electronic methods for procurement and payment to reduce costs.
And the United Nations last week highlighted the importance of improving disabled people's access to information technology. "We want to promote good Web-site design that allows all people to benefit from the new technology, and we want product developers to consider the needs of the disabled in their new designs," said Sarbuland Khan, an executive coordinator with the Global Alliance for Information and Communications Technology and Development.
Yahoo Faces Antitrust Probe In Taiwan
Yahoo Taiwan last week announced a 3 percent final-value fee for sellers at its auction site effective Aug. 10.
However, as Yahoo is Taiwan's market leader for online auctions, some officials have voiced concern that the company's decision might undermine fair trade. Subsequently, Taiwan's Fair Trade Commission has contacted the company for details, according to a Yahoo spokeswoman.
Under Yahoo's new plan, some categories such as automobiles, real estate and services would not be charged the extra fee.
"We need the support of the community to ensure that we invest more to further improve services and upgrade the functionality of the platform," Charlene Hung, a vice president at Yahoo Taiwan said in a statement. "If you take the mature online-auctions markets such as the United States and Japan as a benchmark, Taiwan has launched the [charge] much later. United States operators charged sellers in the first year and Japan three years after the platform was launched."
In Japan, meanwhile, officials are seeking public comments on a draft report outlining a framework for competition rules to address a transition to Internet-based networks.
Japan's Ministry of Internal Affairs and Communications also is weighing the country's digital transition and how its broadcasting policies meet the needs of the viewers. The ministry is seeking comments on a draft summary of a study group's findings through Aug. 31. The ministry further is seeking comments through June 23 on telecommunications competition in 2005.
In other news, Japan on Tuesday launched an earthquake early-warning system designed to detect underground tremors and estimate their intensity.
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