
Venture capital investment is growing faster outside the US - mooreds
https://www.citylab.com/life/2018/10/america-losing-its-edge-startups/572323/
======
beat
I recently read _Factfulness_ , by Hans Rosling, and it really changed how I
read articles like this. Here's where this article goes totally off the
rails...

It's only showing American startup activity as a proportion of global startup
activity. I might have missed it in a quick read, but _nowhere_ did I see
total numbers by nation, or by startup city.

Let's shift perspective slightly. Is American investment in startups
decreasing? Not compared to China or whatever, but compared to itself? Or is
it staying the same, or growing? Looking at Pitchbook data, the biggest year
for US venture capital was 2015 ($82.2B), with 2017 close behind at $81.9B,
and 2018 looking to be about on par. So stable, basically.

What this tells us is not that the US startup activity is in any way
unhealthy, but rather that the rest of the world is figuring out how to do it,
too. And what's wrong with that? How is that a negative? We don't get that
from the article, because it's stuck in this misleading mode of lost
competitiveness from is comparison model.

This is why everyone should read _Factfulness_. No other book I've ever read
has helped tune my bullshit detector so well.

~~~
adventured
Further to that point, the article pretends it's a global phenomenon that's
occuring. It's not. Venture capital has barely budged in the developed world.
That growth is almost exclusively isolated to two countries: China and India.
The growth in the rest of the world is very modest as a share of the global
total VC.

Just look at the expansion in China since 2005, as one would expect, it
represents the extreme majority of all VC expansion globally. The story should
have actually been framing the premise as: China's dramatic economic expansion
since the late 1990s, in which it added ~$80 trillion in cumulative economic
activity over 20 years, has resulted in a lot of venture capital activity.
They went from 1% of global VC activity, to 25%, in roughly 20 years (12x that
of France now) - that's the primary story.

Or put another way, since ~2006, the US has bled only three to four points of
its global share of all VC to 190 some countries, and roughly 24 or 25 points
to just China and India.

That wouldn't make for nearly as attention-getting of a headline though.

~~~
beat
Are there any other countries that are _seriously_ in the software industry
besides the US, China, and India?

------
askafriend
I buy the data. I don't buy the conclusion.

America blazed the trail. Do you think the rest of the world is simply going
to sit idly on the sidelines after watching the success? No. Entrepreneurs
around the world have been watching, and they've been inspired to create
movements in their own cities. Governments have been watching, and they're
inspired to support their entrepreneurs. The rest of the world woke up and
that's a good thing for the world.

Also what's with comparing America with an aggregate of the rest of the world?
That alone shows how far and away America is that we need to make bad faith
comparisons like that.

Here's an example from the article:

> While it is true that venture-capital investment in the U.S. continues to
> rise, having reached more than $90 billion in 2017, such investment is
> growing even faster in other parts of the world, expanding by nearly 375
> percent — more than twice the 160-percent increase here.

~~~
debacle
> Do you think the rest of the world is simply going to sit idly on the
> sidelines after watching the success?

I think Europe will. When it comes to business, they tend to eat their young.

~~~
bauerd
What do you mean by eating the young?

~~~
dnautics
usually it refers to policies which (usually unintendedly, sometimes
explicitly) take from the productivity of younger people to finance older
people. Because it is difficult to predict the future, the fear is that the
unintended consequence is that this may take so much from the young that it
robs their future. There are very good reasons to at least consider this as a
possibility, because policymakers seem to make state revenue projections that
are consistently overoptimistic. Also, programmes that were instituted as
temporary often wind up becoming permanent and then also get mission creep;
some programs that wind up being generational are instituted without taking
into account demographic shifts, especially in fertility rates, etc.)

The lost decade in Japan is often cited as such an example, but increasingly
we are seeing things like wage stagnation among <30 in the US and Europe that
may also be the result of this (of course plenty of mainstream explanations
abound as well).

~~~
bauerd
Great answer, thanks for taking the time!

------
AlexB138
This article seems like bunk fear mongering to me. It talks about everything
in terms of percentages of investment, percentages of companies and growth
rates: cherry picked statistics that seem to be intentionally misrepresenting
reality. The global economy is not zero-sum. Other countries growing their
startup scenes is a good thing (with a notable exception around those doing it
with heavy IP theft) and should be celebrated, not spun into fear of the US
losing out. Let the US worry about whether it's healthy and growing, not fret
about whether others are.

~~~
thoughtexplorer
A rising tide lifts all boats.

~~~
merpnderp
I wonder why the down votes, as the long term trend has been for this to be
emphatically true.

~~~
snackbugs
It's a contemporary euphemism for "trickle down", the long term trend of which
has been emphatically untrue.

~~~
thoughtexplorer
> It's a contemporary euphemism for "trickle down"

Really? Trickle down proponents have co-opted the rising tide aphorism? Ugh.

------
projectramo
LeBron James is not improving his basketball skills nearly as fast as the
world's babies are improving their skills.

~~~
danny_taco
I love this analogy

------
s3r3nity
I'm not sure the data supports this conclusion that "America is losing its
edge."

VC funding continues to rise as a whole, and the declining share of US VC
invested vs. rest of the world is just a trend of a broader portfolio growth
from international startups. That would be just lazy statistics - e.g. if I go
from 1 US city to 3 US cities + 3 UK cities, I have growth in VC funding as a
whole, as well in the US, but the US goes from 100% to 50%.

VC funding is growing faster in other parts of the world? Well when you're
denominator is 0, or really low, of course growth "rate" is going to be high
by definition. It's not really apples-to-apples. Further, I don't see whether
or not the US has hit diminishing returns, yet, from this article, or if US
growth is still healthy.

The data on China, though, is intriguing - maybe someone else here more
informed than I am could speak to that.

------
projectileboy
As others have pointed out, there are some things in the article worth
considering, but whenever people talk about "making the next Silicon Valley",
I feel like they never seem to appreciate just how special and rare and
fragile a successful ecosystem is. A million little factors all contribute to
making something like that happen, the absence of any one of which tends to
make the other factors disappear as well.

------
NTDF9
I personally am ok with silicon valleyesque hubs coming up around the world.

But what's really surprising is the speed. The reason? The best markets and
the best people are not coming here anymore.

Sometimes when I go to Asian countries, I almost feel like they're from the
future. Payments, electric scooters, charging stations, rental bikes, AI,
digital ecosystems, car sharing, hotels, biofuels, cloud based systems etc.
are all waay more important, waay more mature, waay more people designing,
waay more usage, waay more convenient than the US.

The more that smart entrepreneurs decide that US is not the future, the more
tides are a turning. The next Sergey Brin will probably be in Asia.

~~~
seanmcdirmid
Fun fact: China and Japan both use far more cash than the USA. Cloud,
especially cloud providers, is way more mature in the USA. Car sharing ditto.
Try finding a car charging station at a Chinese supermarket parking lot like
you’d find at Whole Foods, etc....

China has made a lot of progress in the last few years, they are definitely
making faster progress than the USA. But they also started way behind and are
still, to much extent, behind in many areas.

~~~
NTDF9
> China and Japan both use far more cash than the USA. Cloud, especially cloud
> providers, is way more mature in the USA. Car sharing ditto. Try finding a
> car charging station at a Chinese supermarket parking lot like you’d find at
> Whole Foods, etc.

I agree. But that's the difference between US until the last decade and today.
Cloud providers here are mature because Amazon pioneered it in the last
decade.

But AI on cloud is all Alibaba. We don't hear about it here in US media but US
companies are playing catchup.

Same for charging stations. They don't need a charging station in whole foods
because most people don't even drive as much. They order groceries on apps.
Even if they do, charging stations are present in gas stations there. Their
low cost cheap cars have features that rival Tesla (albeit at a lower quality
and lower price)

[https://www.youtube.com/watch?v=92HoppERe2M](https://www.youtube.com/watch?v=92HoppERe2M)

We here in the US just don't get this shown to us in media.

~~~
seanmcdirmid
> But AI on cloud is all Alibaba.

Huh? I mean, Alibaba is doing alright, but not particularly better than the
other cloud providers.

> Same for charging stations. They don't need a charging station in whole
> foods because most people don't even drive as much. They order groceries on
> apps. Even if they do, charging stations are present in gas stations there.
> Their low cost cheap cars have features that rival Tesla (albeit at a lower
> quality and lower price)

Teslas are actually fairly common in Beijing now because of the plate lottery.

The Chinese have plenty of parking lots and plenty of driving. The biggest
challenge to personal electric cars in China, something I don't think anyone
has figured out yet, is that many people don't actually have formal overnight
parking spaces for their cars. Sure, it works for taxis, you'll see taxis use
those charging stations, but no one else.

Look, I've totally been there. We used to have bottled water delivered to our
apartment (heck, even before the apps came out, we'd just call the store
downstairs). I don't do that anymore now that I'm back in the USA, I just
drink from the tap. And no, I never had a car in China either, but plenty of
other people did and the grocery stores weren't empty (especially when
compared to a western one)!

> We here in the US just don't get this shown to us in media.

------
thecleaner
Confession - didn't read the article because the title shows that the author
has its head in the wrong place. There shouldn't be comparisons like these
because every ecosystem is different. USA has a mature startup ecosystem and
is rather awesome. Also why the competition ? Startup ecosystems should crop
up everywhere since these are so healthy for the world economy as a whole.

------
echan00
I also buy the data, but not the click-bait conclusion.

China aside, the U.S is still by far the strongest place for startups. Venture
capital was invented in the U.S, but just because it is not the only country
with such industry today doesn't mean it has lost its edge.

------
desireco42
I have trouble understanding the problem. Should Silicon Valley corner the
market for startups? I believe in entrepreneurship and empowering people, this
is excellent news. It will expand the number of startups exponentially,
Chinese startups will learn things from US, and then teach us here few tricks.
European startups will bring their own flare, South American ones will bring
their own color to the mix. And amount of VC investment will explode, as it
will be beyond just what US, or SV can provide.

I see this as a very good thing. What we should do is, find a way to
collaborate with each other and to help each other do better.

------
rvn1045
The article only states that the share of venture capital deployed in the
United States is declining and not the total amount. The total amount is
increasing. This is to be expected and this is not surprising by any means.

Article states that investment outside the United States is increasing at a
faster rate. That makes sense since its a combination of trying to catch up
from a lower base and a faster growth rate in gdp.

The us share of world gdp is 23%, if venture capital was proportionally
distributed across the world the us would only get 23% of total venture
capital spending.

------
jermaustin1
What edge? Silicon Valley VCs still invests in American (and global)
companies. Just because London VCs also invests in British (and global)
companies, doesn't mean one city is competing with the other. I don't get why
they are even compared.

Now if you want to list which places are the best to BUILD a startup, that's a
different thing all together.

I came across this awesome site the other day[1] and its made me think about
potentially opening up shop somewhere other than NYC.

1: [https://nomadlist.com](https://nomadlist.com)

------
ashelmire
I'd be interested in a similar comparison for startup success. Do American
startups fare better than others around the world?

------
100-xyz
Another clarification: most of these VC in China is in a few, huge deals by
Alibaba, Tencent etc. If one looks at the number of startups that are getting
funding, China ranks very low.

I have lived in China for 15 years, am located in Beijing and am a founder of
a startup.

~~~
shanghaiaway
There are an incredible numbers of funded startups in China. You can't make up
stuff because you live in the country.

~~~
100-xyz
[http://www.startupsusa.org/global-startup-
cities/](http://www.startupsusa.org/global-startup-cities/)

Look at Appendix 7 Top 50 Cities for venture capital deals Top 50 Cities for
Pre-Venture Capital (Angel + Seed Stage) Deals

Especially the second one clearly shows it.

------
hal9000xp
_Europe will not win_ race for ambitious people.

I lived in Sweden for almost one year as an expat (I'm a software engineer).
Now, I live in the Netherlands for more than two years.

I can say for sure that Europe is nowhere near Silicon Valley in terms of
compensation for ambitious software engineers. Sweden went total nuts with
taxes, anything above $6500 per month would be taxed at 55-60% tax rate. It's
effectively cap to _enforce_ equality of outcome.

60% tax doesn't mean that ultra-high salaries will be taxed at this rate. It
means that ultra-high salaries will _not_ exist in job market in the first
place.

The best Swedish startup threatens to leave Sweden because of regulatory and
tax burden [1].

The Netherlands recognized importance of highly-skilled expats by introducing
tax discounts called "30% ruling". I do respect their efforts to attract
talent. That's why I moved from Sweden to the Netherlands in 2016.

However, as non-EU citizen you can work only for publicly registered sponsors
[2]. Usually, it's boring well-established companies. So I missed some cool
opportunities due to this limitation.

As I learned dutch local job market, I found that almost nobody will pay you
10'000 EUR per month.

Aside from tax and regulatory burden in Europe, there are cultural things like
Law of Jante [3]. I can't imagine how society with such mentality can attract
highly ambitious people.

Also, talking about money in Europe is kinda taboo. And dutch automatically
repeat "money is not everything". It wouldb't annoy me if someone committed to
work for open source software. Or being great painter. But when recruiter
respond me "money is not everything" when I'm asking "too much", it annoys me
a lot.

With that in mind, I decided to abandon idea of living in Europe, getting
citizenship, learning dutch language etc. It was tough decision for me but
it's time to move on. It's not kind of a society where I want to spend rest of
my life. Sorry dutch and swedes, I don't fit here.

So I decided to move to Hong Kong. I've just got very lucrative job offer in
Hong Kong (in HFT). The size of compensation is _far beyond of what Europe can
offer me_. Now, I'm almost on par with US (I couldn't get into US because I
don't have any degree). Now, I'm just waiting for my HK visa getting approved.

You might troll me saying that, I'm whining. OK, I have answer to that. Just
look at my _net salary_ increases:

Russia -> Sweden (2015) +28%

Sweden -> Sweden (2015) +15%

Sweden -> the Netherlands (2016) +63%

the Netherlands -> Hong Kong (2018) +83% (and possible bonus up to 300% of
yearly salaries!)

I will work like crazy fanatic and in next six years I _will_ be well over $1M
of liquid net worth.

So Europe lost me. Europe is perfect place for people who just want to work
from 9 to 5 and put family as their top priority. It's not suited for risk
takers.

Links:

[https://www.thelocal.se/20160412/spotify-founders-sweden-
is-...](https://www.thelocal.se/20160412/spotify-founders-sweden-is-heading-
in-the-wrong-direction)

[https://ind.nl/en/work/Pages/Highly-skilled-
migrant.aspx](https://ind.nl/en/work/Pages/Highly-skilled-migrant.aspx)

[https://en.wikipedia.org/wiki/Law_of_Jante](https://en.wikipedia.org/wiki/Law_of_Jante)

~~~
mhjas
While I find your perspective interesting I disagree with some of your
conclusions.

> It's effectively cap to enforce equality of outcome.

It isn't so much to enforce equality of outcome as to enforce equality of
income. What you are experiencing is to a large extent being on the wrong side
of inequality. Just that isn't income inequality, but rather things like
wealth, real estate, inheritance and education. Inequalities which people in
Sweden largely aren't aware of, or accustomed to. If you had arrived 10 years
earlier you would have, at least to a larger extent, been set for life. Other
than that I can certainly see your perspective because it is almost impossible
for a "salary man" to catch up in Sweden.

~~~
hal9000xp
"as to _enforce_ equality of income". This is what puts me off of Europe!

I don't mind if group of people _voluntarily_ decide to live in communism and
share with each other everything they earn. Like hippies who lived in
сommunes.

If high taxes (>33%) are not voluntary then it just means that social
democrats _are not confident_ that most successful people in the country will
share their ideals.

If European social democracy is so cool, then it should work on _purely
voluntary basis_.

Let's re-frame conversation _from arguing to selling_. I mean there are lots
of top technical talents in India and China. How are you going to _convince
them_ to go to Sweden instead of US? It should be pretty damn good reason to
decline $300k offer from Silicon Valley and go to Stockholm instead!

P.S. I think selling/pitching society ideals is much more positive and
productive than arguing.

~~~
mhjas
> "as to enforce equality of income". This is what puts me off of Europe!

It is one of the few ways to have an equal society. With to large income
inequality the welfare state becomes unsustainable. The poor can't pay for
services performed by the rich and ultimately you get a society like the US or
worse. Everywhere doesn't have to be the same, no one is forced to live in
Sweden. Swedes have very good visa conditions and generally do very well
abroad.

> How are you going to convince them to go to Sweden instead of US?

Sweden is a small place. To the extent it needs top talent there is plenty
available. People who want to make $300k shouldn't and largely won't move to
Sweden anyways. This isn't a competition Sweden can win. Sweden is largely
successful because it competes, or have competed, on its own terms. Not by
trying to be a worse copy of something else.

Swedish society can, or could, attract people that wants things that are in
line with what it is good at and not readily available in other places i.e.
its unique selling proposition. Things like education, family and quality of
life. There is a foundation to provide those things that has been lost in the
last 10 years or so. A lot of people move for opportunities, making money is
only one opportunity.

I think it is telling that you are also leaving the Netherlands as a
significantly lower tax rate couldn't keep you there either. Note that I am
not saying the Sweden is attractive at this point, just that I find it
unlikely that taxes are the main problem.

Personally I don't like Hong Kong, but it will certainly be different. Don't
miss out on going to Shenzhen.

~~~
hal9000xp
I acknowledge that Sweden has number of advantages and benevolent government
with no corruption. It's certainly one of the top countries in the world in
terms of development.

My guess is that Sweden might be popular choice among people who want to
pursue PhD or something like that.

I fell in love with Hong Kong first time I visited it as a tourist in 2013.

