Untitled document-39

International Financing Overview

• Speaker: Craig Galbreath

• Focus: International financing, cross-border financing, and international private equity investment.

• Key Concepts:

  • Private equity investment has historically lagged behind in international markets compared to the U.S.

  • The U.S. is a leader in private equity investment (ranked #1 or #2 globally).

  • Growth of international funds has been notable since about 2000, particularly in Asia and Europe.

Historical Context

• Development Timeline:

  • Private equity began in the mid-1960s in the U.S., with significant growth noted since 2000.

  • European governments launched initiatives to support private equity funding, resulting in increased regulations and incentives.

• Roles of Governments:

  • In Europe, government investment in private equity funds is common, but stringent regulations may hinder innovation.

Private Equity Landscape in Asia

• Venture Capital Development:

  • Significant development in South Korea and China with venture capital funds trading since the mid to late 1980s.

  • Example: Korea Technology Investment Corporation, established in 1987, as a pioneering venture capital fund.

  • Corporate CEOs acting as angel investors are found to encourage technology development for economic growth in their countries.

Angel Investment in Asia and Europe

• Angel Networks and Corporations:

  • Individual angel networks exist but are less developed compared to the U.S. model.

  • Corporate venture capital is prevalent in Japan and Korea.

  • European Trade Association for Seed Money and Private Capital (EBAN) promotes independent angel development in Europe.

Global Venture Capital Industry Insights

• Statistics on Unicorns:

  • Definition of "unicorn": a privately-held startup company valued at over $1 billion.

  • U.S. holds approximately 50% of the world's unicorns, with China rapidly catching up due to government support.

• Equity Financing:

  • Majority of funding occurs within the home country, with about 90-95% of angel funding remaining domestic.

  • Introduction of micro equity funds for developing markets, requiring smaller investments (e.g., $50,000).

Cross-Border Private Equity Financing

• Two Major Issues Addressed:

  1. Expatriate Funding: U.S. individuals or firms raising funding from local entities in foreign markets (e.g., starting a business in India).

     • Variability in regulatory frameworks and institutional readiness by country affects funding accessibility.

  2. International Operations Funding: U.S. firms seeking capital from domestic sources for operations abroad.

     • The viability of such investments depends on host country risk, institutional capacity, and capital repatriation policies.

• Challenges in Different Markets:

  • Differences in business culture and acceptance of independent financing can complicate fundraising efforts in various countries.

  • Potential issues with repatriating funds can deter investment from U.S. angels and venture capitalists.