VCs Turning to BRICA in Slump?

Adeo Ressi, founder of TheFunded, recently gave an interesting indictment of Silicon Valley explaining the problems with VC culture. One accusation is that venture capitalists rely too heavily on their network of friends, not including enough ‘outsider’ talent. Another is that more money is being invested into venture firms than those same VC firms are generating from their stakes in start-ups.

Mathew Ingram of GigaOm writes..

But is it evidence that the VC game is kaput? Hardly. Instead, it’s reminiscent of Warren Buffett’s quip about how if he had been at Kitty Hawk he would have shot Orville Wright’s plane out of the air, because the airline industry over the last 100 years has been a net destroyer of capital. While that may be true (I haven’t double-checked Buffett’s numbers), that’s not to say investors haven’t been able to make money throughout that troubled history…

Have there been too many funds created, too much money poured into finding the next Facebook, Twitter or YouTube? Undoubtedly. But the VC industry is subject to the same economic forces and laws of supply and demand as any other industry — in other words, if some funds are making money, others will emerge and try to duplicate that success, even if they know the odds are against them…

An industry like that is inevitably going to grow and contract, and now sure feels like a time of contraction. But that doesn’t mean smart VCs can’t prosper by concentrating on what they know, or by staying small enough to get more “home runs,” as angel investor Austin Hill notes in a comment at TechCrunch. The VC industry isn’t broken any more than any other boom-and-bust industry is broken. It’s likely to go through a restructuring as a result of the current downturn, and some VCs will undoubtedly go out of business, as they should. But there will always be VCs, just as there will always be gold companies — and airlines.

For my colleagues and fellow entrepreneurs in Africa, this is important because when an old models aren’t working, there’s no choice but to try new things. In the case of venture capital, firms are looking for new opportunities to invest and increasingly those opportunities aren’t domestic as Sun Microsystems President and CEO Jonathan Schwartz points out…

That’s a bit of a truism in the technology world – well intentioned standards bodies and departments of justice can do their best, but at the end of the day, volume deployment is the only setter of standards. Ubiquity trumps policy, just about every time. To that point, I was on a panel recently, discussing the impact of technology on the world’s more rapidly developing economies (what’s often referred to as “BRICA,” or Brazil, Russia, India, China and Africa).

One of the speakers referenced an interesting shift in the traditional media industry: western companies were turning their attention toward the developing world. GDP growth wasn’t drawing their attention – as much as demographics. Teenagers and those in their early twenties represent the biggest media buyers in the world, spending a greater portion of their income on music, movies and entertainment than any other age group. And the majority of people fitting that age profile live, by definition, in population centers – not in the US, UK, or Germany, but BRICA. Whose collective population represents nearly half the entire planet’s.

There probably hasn’t been a better time for companies in emerging countries to position themselves for investment from foreign groups.