Geo-Arbitrage Venture Capitalists
According to a WSJ study published last year, 51% of the private US unicorns have immigrant co-founders. Although it may be surprising for many, I believe it is a bit arrogant to think that there are more visionary entrepreneurs in the US than the rest of the world.
When you look closely at the data, it is interesting to see that almost all of the immigrant co-founded unicorns launched their businesses in the US and raised funding from US VCs.
The American Dream still exists after all…
Well, what about all the rest of the great entrepreneurs who do not have the means or access to move to the US and start a company? What if you can catch these entrepreneurs early on, while they are just starting up in their home country, and help them grow globally?
That has been the strategy for many of the newly launched funds all around the world. Let me start by giving you a brief on what we are trying to accomplish at 500 Startups Istanbul.
Decentralizing the American Dream
500 Istanbul is a VC fund under 500 Startups where we invest in regional entrepreneurs that have the vision and capacity to build global technology businesses. A number of our portfolio companies get the chance to join our Silicon Valley Seed Program (formerly known as the accelerator) or our Series A Program.
With 500’s active presence in more than 30 countries and investments in 60+ countries, our portfolio companies can also use our global footprint while expanding to different regions. 500 Startups’ network and global know-how is our main value proposition.
Our fundamental strategy is to invest into regional startups that have a global potential and help them launch in international markets, especially the US. Through our introductions, entrepreneurs can accelerate their legal/financial processes and gain initial traction. 500’s strong community supports them with soft landing in the US market, as they are now ready to raise a US seed round!
This geo-arbitrage opportunity leads to great investment multiples — at least on paper — at such early stages. Although not realized yet, amazing returns can actually be made if you capture great multiples within 6 months of investing across a whole portfolio.
Of course, we are not the first on executing the geo-arbitrage strategy in VC. Many micro funds in emerging markets are on the rise across the globe aiming to find great talent early on and generate returns by providing them access to a valuable Silicon Valley network.
As such bridges and opportunities are created all around the world, we’ll see more immigrant entrepreneurs creating unicorns and the US will become the only platform where visionary entrepreneurs come to build global businesses. This talent network effect will only surge — as bright people go where the other bright people are.
But what about its impact on the local ecosystems? I’ll tackle that subject in my next post…