The venture capital market worldwide has just gotten more competitive as investors try to outdo each other in backing high-potential startups, particularly those outside the US, VentureBeat reported.
Figures from financial services company Ernst & Young showed that last year, venture capital investment worldwide went up 2% to $48.5 billion when seen side by side to the previous year's figures. There was also an improvement in the economic conditions in many markets around the world as liquidity levels and investor confidence increased, the report said.
Last year, promising startups had access to more sources of capital, not just the venture capital firms. They could source capital from angel investors who began to establish new funds and from crowdfunding platforms. In addition, corporate executives also began to collaborate with entrepreneurs, the report said.
In the report, Ernst & Young global venture capital researcher Bryan Pearce said these posed challenges to Silicon Valley's venture capitalists. He wrote, "These changes have challenged VC players to change and raise their game. They have become more global in their geographic outlook, more sophisticated in their analysis of opportunities and more innovative in terms of how, where and when to invest." Pearce added that these will lead to more venture capital firms setting up offices in Russia, Mexico and other markets that hold a high potential for growth.
The number of venture firms that raised funds last year was 325, representing a decline to the 344 firms which were able to gather funds the year before. The US comprised 64% of these funds. Because of this decline, the excess capital that still remained to be deployed to investments or their "dry powder" have also increased, the report said.
The Ernst & Young report also said that the startups funded last year by venture capital came not only from the US but from Europe, India and Israel as well, VentureBeat reported.
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