Redrawing the Map

How the “Decoupling” of Capital and Geography Will Lead to More Unicorns — in More Places — in 2021

Endeavor Catalyst


By Allen Taylor, Managing Director, Endeavor Catalyst

In the 16th and early 17th centuries, cartographers would often include elaborate drawings of sea monsters and other mythical creatures in their maps to denote unknown or unexplored territories. The implication of this common practice was to signal both that “they had no idea what was really out there, and yes, it might be kind of dangerous.”

Remarkably, up until very recently, this sentiment of 17th century map-makers could also be accurately applied to most 21st century venture capitalists (“VCs”). Sitting comfortably in Silicon Valley, New York or London, many of the world’s smartest, most experienced private market investors viewed their opportunity set for new investments through a narrow geographic filter. Emerging markets like Latin America, the Middle East, Africa and Southeast Asia were more than just “outside their strike zone” — they were uncharted territory filled with unknown dangers.

A sea monster symbolizing unknown or dangerous territory stalks the coast of Argentina in this 1573 map from Ortellius. Up until recently, many global venture capitalists viewed Latin America in much this same way, despite the emergence of companies like MercadoLibre [NASDAQ: MELI] and Globant [NYSE: GLOB].

In good news for founders everywhere, that small geographic aperture of the world’s best VCs — which has been slowly opening over the last 10 years — has been dramatically impacted by the events of the last 10 months. In a significant change in both mindset and behavior, VCs are now starting to back founders they have not met in-person, who live and work in geographies they would not have previously considered.

The examples of this are many. In June 2020, just three months removed from Sequoia’s now famous Black Swan memo, The Information reported that “venture firms including Sequoia, Accel, NEA and General Catalyst are realizing they can close deals without meeting founders face-to-face.” An internal poll conducted in August of venture investors affiliated with the Kauffman Fellows (where I sit on the board) found that — just five months into this new world — 86% of those surveyed had already closed a deal “100% virtually.”

Smart investors quickly realized this shift to “investing via Zoom” opens up new geographies. NEA Partner Ben Narasin shared with Forbes in August that “one of the first investments we did post-pandemic, where we didn’t meet in person and did everything by Zoom, was in a more distant geography.” Jason Green of Emergence Capital — backers of companies like Salesforce, Veeva, Box, Yammer, and, appropriately, Zoom itself — concisely summarized this important change on the Strictly VC podcast in November with the comment that “our last 3 investments have all been outside of Silicon Valley. And we never met the entrepreneur in-person. Before this year, we had never done that before.”

Throughout the summer and fall, as a myriad of examples began to emerge, I realized that this was not a one-time “pandemic” thing. This was a new — and likely permanent — behavior that could radically redraw the map of venture capital globally.

For our own venture capital investments with Endeavor Catalyst — the investment arm of Endeavor ( where we focus exclusively on emerging and underserved markets — we have made more than 25+ new equity investments since March 2020. In the US, this new reality has allowed us to back companies like AppHarvest (Morehead, Kentucky), Fleetio (Birmingham, Alabama) and Sondermind (Denver, Colorado), without ever getting on an airplane or meeting those founders in-person. Beyond the US, we’ve been able to do the same thing, investing in 23 companies in 11 different countries since March (Brazil, Chile, Indonesia, Mexico, Nigeria, Peru, Saudi Arabia, South Africa, Spain, Turkey and Uruguay) with 100% of the investment process conducted virtually.

Jonathan Webb, founder and CEO of AppHarvest in Morehead, Kentucky — one of 25+ founders backed by Endeavor Catalyst in 2020 with a 100% virtual investment process.

The “decoupling” of capital and geography

Whether this is truly the “end of geography” in venture capital or its less extreme cousin (“geography matters less”), it is clear that VCs’ increased openness to backing founding teams outside their home city or region combined with the widespread adoption of “investing over Zoom” has brought about the “decoupling” of capital and geography. (Credit to Jonathan Tower from Catapult for coining this phrase in his 4 Expectations for Tech and VC in 2021.)

Of course, the practice of smart investors looking beyond Silicon Valley did not start in 2020. Internationally, the rise of venture capital in markets like China, India, Brazil and Indonesia has been well documented, with a record-number of Chinese VCs being named to the Forbes Midas List for the 3rd year in a row in 2020. In the US, even pre-COVID, some venture investors were already starting to shift their focus away from traditional hubs of innovation capital, as championed by AOL Founder Steve Case’s “Rise of the Rest” movement and chronicled in this April 2020 New York Times article.

But the flow of capital into markets once ignored by leading investors has been greatly accelerated by COVID-19, and will continue to grow as this new behavior of venture capitalists — triggered by the pandemic — solidifies into a more permanent practice. Intriguingly, while much has been written about changes in “consumer behavior” driving rapid growth in VC portfolios in areas such as telehealth, ecommerce, and grocery delivery, it is the change in “VC behavior” in redrawing their own mental maps of their investable geographies that may lead to the most profound changes on the global startup economy in the long-term.

This decoupling of capital and geography will mean several things for founders, investors and ecosystem builders in 2021 (and beyond). Here are 3 that stand out:

1) Globally-distributed, trust-based networks matter more.
VC is local largely because networks are local. Humans build trust through proximity, cultural bonds, and shared experiences. There is a naturally occurring place for this “trust-building” to happen and it is called “here.” As in, wherever you live and spend most of your time.

But the world was already changing in this regard before 2020. Globally-distributed organizations like YPO, Techstars, Kauffman Fellows, 500 Startups, Endeavor, H2, and others were already building trust-based communities that transcend geography — connecting people in places that do not share a border, a continent or even a direct flight. I foresee that existing trust-based networks will thrive in this new environment, and new ones will be built. As geography matters less, globally-distributed trust-based networks matter more.

2) Building trust in this new environment is a new skill. Those who can do it faster and better will have an advantage.
For both founders and investors, the exercise of building trust in a digital world is largely new. In a video-first economy, we will all have to learn new ways not just to conduct due diligence, but to cultivate and nurture the real human relationships that are the bedrock of all durable, long-term investor-founder partnerships.

My hypothesis is that there will undoubtedly be a surge of business travel post-pandemic as folks seek to cement the bonds that have been cultivated online with that first “real-world” interaction. But that over time, online trust-building will become the norm for the world’s best founders and investors who can leverage shared networks and values to replace shared board rooms and dinners. Business travel will not disappear, but it will almost certainly decrease. Much like commerce, I predict relationship-building will become increasingly omnichannel, and those who adapt most effectively to this new way of operating will have an advantage.

3) More $1B+ companies — unicorns and exits — in more places
Increased participation from world-class investors in emerging and underserved markets — particularly at the Series B and C stages where they can bring invaluable experience in what LinkedIn co-founder Reid Hoffman calls “blitzscaling” — will lead to more companies successfully scaling up to reach valuations of $1B+.

This phenomenon is already well underway. Startup Genome’s fantastic Global Entrepreneur Ecosystem report has documented the rise in “Startup Ecosystems with a $1B+ startup” (including unicorns and exits) from 4 to 84 over the past decade. But the participation of more high-quality, smart connected capital will serve to accelerate this further.

In Endeavor’s own portfolio over the past 12 months, we have seen the first-ever unicorns from markets like Kentucky (AppHarvest), Mexico (Kavak), and Uruguay (d.Local) as well as the first $1B+ exit in Turkey (Peak Games). Accelerated by the decoupling and geography, we expect to see more $1B+ companies — unicorns and exits — in more places in 2021.

The story here is not about the demise of Silicon Valley; it is about, as Fred Wilson titled it in his fantastic post last month, the rise of everywhere. In a great piece that perfectly captures this change of VC behavior and why it matters, Wilson writes: “If there is one megachange in VC from the pandemic (there may be many), I think it is the comfort with making investments over video without the founder or the VC traveling to meet each other.” He goes on to describe how this behavioral shift will lead to a “massive increase” in both “the geographic range of where investors can and will invest…and the number of founders starting companies in places other than Silicon Valley, NYC, and a few other locations.”

In his conclusion, Wilson applauds the rise of tech entrepreneurship everywhere, praising it as a “profound thing for the world and something to be incredibly happy about.” At Endeavor, we truly couldn’t agree more. We believe High Impact Entrepreneurs will continue to change the world in 2021 and beyond — now with more support from world class investors. That is very much a good thing. And so when it comes to “redrawing the map” of entrepreneurship and venture capital in the 21st century, someone ought to tell the cartographers: fewer sea monsters, more unicorns!

Allen Taylor (@aktaylor) is the Managing Director of Endeavor Catalyst, an innovative, rules-based co-investment fund through which Endeavor invests into its portfolio companies in emerging and underserved markets. Launched in 2012, Endeavor Catalyst has $250M in Assets Under Management (AUM) across three funds and has made 160+ investments across 30 markets to date. You can reach Allen on LinkedIn here.



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