Now that China and India have plunged into the venture capital arena full throttle, many VCs are wondering what this will mean for venture investors in the traditional innovation hotbeds of Silicon Valley, Northern Europe and Israel. Joe Schoendorf, a partner with Menlo Park-based Accel Partners, says the change is making venture capital the asset class that never sleeps.
Accel, which manages $4 billion, raised three separate start-up funds last year, one for the US, one for Europe and Israel and one in China. Schoendorf, who is also a strategic partner of the World Economic Forum and a consultant to the Ministry of International Trade and Industry in Japan, says the state of the world VC is straddling will also mean an upcoming period of intense innovation.
“Look at global geopolitics, it requires security with a big ‘S,’” he says. “This means tracking everything that moves, and verifying that who’s moving is supposed to be moving. And that’s a pretty global problem that won’t be solved for a long time.”
Schoendorf says government will be one of the biggest drivers of innovation to tackle new security concerns. He points to the development of the internet in the mid 70’s through Defense Advance Research Projects Agency, which was developed by the US government in order to create a system of secure communication in the event of a nuclear attack.
“That innovation, 25 years later, spawned one of the greatest social changes in our history,” he says. “I think if you look at most fund breakthroughs, early military funding provides the basis for the ‘R,’ and then it’s entrepreneurs who see the ‘R’ and then go to the ‘D.’”
He adds that the third factor which he predicts will lead to VC boom times are two recent unprecedented advances, web 2.0 and the mapping of the human genome.
“Now that we’ve mapped the human genome, all kinds of new things will be possible,” he says. “I would equate it to where the transistor was when I came to silicon valley in 1966. There’s also a fundamental reinvention going on now in what I call software and enterprise communication. We’re moving to the next generation of video. The whole web 2.0 phenomena means it’s possible to start a company in a few weeks.”