Wednesday, February 21, 2007

Bon voyage, VC!

posted by Andy Leff
Yesterday, I said India was a magnet for VC tech investments -- and a chief competitor to Silicon Valley. Today, Europe wants to give the U.S. tech hub a run for its money, too.

More VC companies are funding startups outside of the United States as the Internet becomes more popular in other countries. The impetus: bigger bang per buck in places like India and China, where labor is cheap and the standard of living is low.

Now Europe hopes to nurture its own under-developed tech sector by drawing VC funding its way. And if it succeeds, America will be forced to make some changes.

For example, U.S. companies don't bootstrap enough. They waste money on unnecessary line items, when they should re-invest in more strategic company operations and initiatives that actually grow and establish the organization. No wonder VCs are looking outside our borders –- they want ROI, and it's becoming less likely they'll get it stateside.

Foreign investment in Internet startups is ultimately a blessing. It connects global communities, and fosters cross-border collaboration. Even better, it forces U.S. firms to be at the top of their game, and present sophisticated, well-developed plans that truly deserve coveted funding.

I doubt VC firms will ever pull out of the United States entirely. But that doesn't give American companies license to fall asleep at the wheel. They must stay savvy, sharp, and ready for a fight.

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