UMVA has learned that global investors are sounding the alarm for countries seeking to build sustainable startup ecosystems: to truly thrive, local investors must prioritize supporting homegrown companies over funneling capital to established tech hubs like Silicon Valley.
Lucy Chow, a seasoned investor, author, and ecosystem builder, emphasized the critical role local capital plays in helping startups grow into globally competitive businesses. "Please keep some of your capital for your backyard," she urged, stressing that it's essential for investors to allocate a portion of their funds to support local entrepreneurs.
While investors are often drawn to the bright lights of Silicon Valley, Chow warned that neglecting local ecosystems can have far-reaching consequences. "Yes, it's bright and shiny over in Silicon Valley, but please make sure you grow your own ecosystem," she advised, highlighting the importance of nurturing domestic talent.
According to information obtained by UMVA, Chow stressed that startup ecosystems are unlikely to produce major exits without local investors willing to provide early-stage funding. "You're not going to get those exits unless you have the first checks written by people who know the ecosystem the best," she said, underscoring the value of local investors in driving growth.
The conversation turned to the impact of technological advances on investment processes, with investors citing the growing use of data, specialization, and artificial intelligence (AI) as game-changers. Jörg Goschin, a leading expert in the field, noted that the venture capital industry has become increasingly specialized, with funds focusing on narrower sectors and technologies.
Goschin highlighted the efficiency AI brings to due diligence, enabling investors to process large amounts of information more quickly. "When you start an investment process, you usually start with a data room," he explained, adding that AI tools can now complete tasks that previously required analysts to spend days reviewing documents.
Despite these changes, investors agreed that the fundamentals of venture capital remain largely unchanged. Renaud Visage, a prominent investor, emphasized that the focus is still on great teams building great companies in favorable markets. However, he noted that the bar has risen, with founders today expected to be more experienced, financially sophisticated, and better prepared to scale businesses.
Chow echoed this sentiment, stressing that while AI and data have become essential tools, human judgment remains crucial. "Ultimately, though, the decision is still going to be that in-person, face-to-face decision," she said, emphasizing the importance of personal connections in investment decisions.
ESG considerations have also become more deeply integrated into investment frameworks, with Goschin noting that environmental, social, and governance factors are now a critical risk tool. As the investment landscape continues to evolve, one thing is clear: the most successful ecosystems will be those that prioritize local support and harness the power of technology to drive growth.
