Silicon Valley Ghost Town II

Here’s some reasons why Silicon Valley is losing its edge in technology innovation – and why Asia is chipping away at its lead.

America’s share of research and development spending slipped to 30.1 percent in 2008 from 32.7 percent in two years’ time while Asia’s share rose to 40.8 in 2008 from 36.9. Battelle-Global R&D Report

America still tops all nations for the most patent applications annually – 53,521 of nearly one-third the total in 2008. But that percentage has slipped from 35 percent in 2004. World Intellectual Property Organization

In 2008, South Korea ranked 4th globally with 7,908 patent applications, an increase of 12 percent and a big improvement over 10th place 15 years ago. China placed sixth, applying for 6,089 patents in 2008, a hike of 11.9 percent. China has steadily climbed the charts, from the 7th spot in 2007 and 8th in 2006. WIPO

Last year, venture capital investment outside the U.S. increased 5 percent to $13.4 billion. The U.S. is still the top venture market, but international now accounts for nearly one-third of total venture money invested. Dow Jones VentureSource

Venture capital investments in the U.S. slid 8 percent last year to $28.8 billion while fund raising decreased 25 percent to $24.7 billion. DJ

In 2008, Asian venture investments declined by 22 percent to $22.3 billion.
Asia venture funds jumped 8 percent to $20 billion. AVCJ

In 2008, China raked in $9.3 billion in new venture investments while India weighed in at $8.5 billion. AVCJ

Asia accounted for 62 percent of global IPOs in 2008, up from 53 percent in 2007. North America contributed only 11 percent of 745 IPOs worldwide in 2008. Ernst & Young

China had the most IPOs two years in a row—126 in 2008 and 209 in 2007.
The U.S. chalked up 34 IPOs in 2008 and 178 in 2007. E&Y

U.S. venture-backed companies generated $24.1 billion through IPOs and M&As in 2008, down 58 percent from $57.6 billion in 2007. Just seven venture-financed businesses in the U.S. completed IPOs and raised $551 million, compared to 76 and $6.8 billion in 2007. These were the lowest levels on record since 1992. DJ

Silicon Valley ghost town

Here is the most shocking evidence I've seen so far about the economic downturn. I snapped these photos at a key tech intersection in Mountain View, California. A close-up look inside the windows of the many buildings that make up this former Hewlett-Packard campus showed not a soul--just lots of empty cubicles. Anyone who is at this campus today is not a customer. Instead, it's used mostly as a quiet place to walk among the tall trees. This is far from the only silent spot in the Valley today. I spotted LOTS of for lease signs like this one pictured.
I will be posting more soon about the transformation of Silicon Valley.

Doing Business in China: Toronto

I've just returned from a visit to Toronto--my fourth trip to Canada in six months! The fun began as soon as I boarded the Porter Airlines propellor flight from Newark Airport direct to the City Center airport, which is appropriately named. The VIP treatment for even economy passengers included being wined and dined during the flight--at no extra charge. At the airport, it was a two-minute ferry ride to the main land, then a hop to my hotel. A change of clothes and I was off to my first appointment, at law firm Gowlings, where I gave a presentation about my book, Silicon Dragon, for the many China-interested partners and their clients. See left photo: Gowlings partners Martin Cauchon, Catherine Pawluch.
Next up was an elegant dinner at a private dining room of a local restaurant, Kultura, hosted by Craig Brown and his law firm Fasken Martineau. The conversation centered on tales of China experiences by the well-traveled group of finance executives.
The next morning, I was up by 6:30AM to get ready to speak at the University of Toronto-Rotman School of Management. By 8AM, the lecture room was full and we had a lively Q&A with students, professors, government officials, bankers, and investors. I autographed plenty of books before my next stop -- to meet the mayor of Waterloo, Brenda Halloran. Waterloo is famous for being the home of Research in Motion (Blackberry). The mayor is a China advocate and would really like to see her community do more business there. (See mayor to the far right in photo above).
A Chinese lunch followed by a stop to meet with representatives at the local chamber of commerce, and we were off to the University of Waterloo and its school for business, entrepreneurship and technology. I kept my talk to 10 minutes to have time to show my videos with Chinese entrepeneurs who are profiled in my book. I was impressed with the calibre of the students and their desire to be tech entrepreneurs themselves!
I'd like to thank the Canada China Business Council, director Sarah Kutulakos, and her team (Tony Gostling, among them), for arranging this whirlwind Toronoto stop on my book tour. Sarah is with me in the photograph with the mayor. Tony is in the photo at Gowlings. Thanks too to my hosts Fasken Martineau and Gowlings, and the universities for showing their support.
I hope to return sometime soon. I must say that Canada is very pro-active when it comes to China!

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Forbes Midas list: China counts

Forbes Midas list: China counts

Forbes Midas list: China counts

What's interesting about the Forbes Midas list, http://www.forbes.com/2009/01/29/venture-capital-midas09-technology_0129_midas_land.html is the number of venture capital partners who rank tops even though their firms are having troubles in China.
John Doerr of Kleiner Perkins Caufield & Byers http://www.forbes.com/2009/01/29/venture-capital-midas09-technology_0129_midas_land.html places first on the top 100 list while the firm's China practice is riding a wave of partner defections. It was Doerr who announced the firm's China expansoin at a press conference in Beijing during April 2007. Three partners have left KPCB China since then: Joe Zhou to form his own fund, David Su to join Matrix Partners and most recently, Ian Goh. That leaves Tina Ju, the highly capable venture partner, as the glue of the China operation. http://www.kpcb.com/china/english/team While she has had notable success with Chinese search engine Baidu and e-commerce site Alibaba, http://www.amazon.com/Silicon-Dragon-China-Winning-Tech/dp/0071494472 those were deals she invested in at her predecessor venture firms before teaming up with KPCB in April 2007. It's early days and the market has toughened, but KPCB China doesn't have a winner among its portfolio yet.
Not to pick on Kleiner. Sequoia Capital scores with four partners on the list, but that standing doesn't reflect the firm's turbulent time in China. Fan Zhang, a co-founder of the China shop, recently resigned. That came after his co-founder, Neil Shen, was sued by the Carlyle Group for “stealing” a deal from them.
Now comes Bessemer Venture Partners. The firm has six partners on the list, yet Bessemer just gave up in China. See my earlier posts on this subject.
I'm convinced that Forbes could use more China perspective in its selection process next year. I do credit Forbes for changing its methodology to reflect more recent deals of the venture partners. Still, the five-year window on the partners’ deals makes for some odd picks, and sometimes outdated ones too. Several venture capitalists I know in China show up as perennials when their deals seem ancient – at least in the fast-paced Chinese venture community.

Technorati tag: China Venture Capital Kleiner Perkins Sequoia Capital Forbes Midas List

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