June 22, 2005 9:00 AM PDT

VCs hanker for hunk of China, India

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Many venture capital firms in the U.S. expect to expand their investments in China and India over the next five years, according to a survey released Wednesday.

The United States will remain the country that captures the most domestic venture capital dollars in the next five years, according to the survey by Deloitte & Touche and the National Venture Capital Association. However, China and India are high areas of interest. Venture capitalists view those regions as ripe for investment, given the high level of IT knowledge there.

"People come here (to the U.S.) from all over the world, obtain experience in the U.S. technology marketplace, then take their knowledge home with them and build their own companies," Mark Jensen, national director of Deloitte & Touche's VC services group, said in a statement.

Twenty percent of U.S. venture capitalists said they are interested in investing in China over the next five years, according to the survey. Eighteen percent are interested in India. Other areas that VCs are interested in include Canada, Mexico and continental Europe, all at 13 percent; Israel at 12 percent; and the United Kingdom at 11 percent.

Overall, 20 percent of the VCs surveyed--virtually double the level cited last year--said they plan to increase global investments over the next five years. Meanwhile, 16 percent of foreign VC firms indicated they expect to increase their investments in U.S. companies over the next five years.

VCs worldwide pointed to energy and the environment as areas of potential investment, with 12 percent currently focused on this segment. Twenty-one percent said they expect to invest in those two areas in the next five years, according to the survey.

"The VC industry sees (opportunities) in developing cost-effective energy sources," Jensen said.

The survey, which was conducted between February and April, measured the views of 545 venture capitalists worldwide.

 

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