Oct 12, 2018

Go deeper: America's declining share of global venture investing

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Reproduced from a Center for American Entrepreneurship report. Chart: Axios Visuals

The U.S. share of global venture capital investment has dropped as European and Asian growth in the sector far outstripped American increases, a new report from the Center for American Entrepreneurship shows.

The big picture: After years of U.S. dominance in the startup business, "the world’s high-tech entrepreneurs are able to stay in their home city or nation and raise venture capital — a pattern that may accelerate if the U.S. government fails to create an entrepreneur visa or attempts to limit the immigration of highly-skilled individuals," cautions the report.

As late as the mid-1990s, the U.S. was home to roughly 95% of all venture capital investment in the world. Today, its share has dropped to just over 50%.

  • Investments in American startups like those in Silicon Valley, New York City and Boston reached $90 billion in 2017 — a 160% increase since 2010.
  • But the rest of the world has collectively grown more than twice as fast — by 375%, per the Center for American Entrepreneurship.

Countries in Europe and Asia are providing lures for people with capital in hand to do business on their turf. Fast-tracked permanent residency and five-figure relocation bonuses are among the perks some countries are offering immigrant startup founders, per Bloomberg.

  • "China's engagement with the rest of the world is way better than [the U.S.]," study author Ian Hathaway, research director at the Center for American Entrepreneurship and a senior fellow at the Brookings Institution, tells Axios. Most companies are attracted to the global market and will go wherever the attitude is positive, he said.

The other side: Immigrants helped found more than half of the 87 U.S. startup companies valued at more than $1 billion in 2016, per the National Foundation for American Policy. Now, venture capital investors and founders have more choice in where they plant their headquarters.

  • Manan Mehta, founding partner of Unshackled Ventures, a firm that helps immigrant-founded startups in the U.S., said investors seeking to recruit foreign startup talent to the U.S. aren't getting any support from the Trump administration, and have to shoulder the burden themselves. "It's more thought, work and effort. Things are taking longer. ... But we're not seeing any decline in our success."
  • Amazon, Microsoft and Google saw an increase in approved applications for H-1B working visas from 2016 to 2017, with Amazon taking up the largest share of applications, per Inc.

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