Prediction:
US Investors will make more investments outside the US than ever before.
Rationale:
The venture market, both in the US and globally, moves faster than it ever has. Where China has seen its market stunted due to policy changes, other markets have seen enormous growth in recent years according to Pitchbook Analysts. US investors have taken heed and continued to push capital into both emerging and established markets around the world. Areas such as Latin America and Southeast Asia have become major targets for US capital investment, and as these regions grow, so will US investment abroad.
Caveat:
Politics play a huge part in overseas investments with the regulatory changes in China earlier this year being a major example of how political changes can impact the investment landscape. What might be more important for 2022, however, is the global macroeconomic climate. For many of these US investors, venturing into foreign private investment is relatively new, and it is a major time commitment that takes resources from their primary strategy. Macro headwinds would likely cause a decline in foreign investment from 2021 levels, though we would still expect 2022 to be high on a historical scale.
Through November, US-headquartered investors had invested in 4,666 VC deals outside of the US, far and away a record number of financings into overseas companies. This figure vastly surpassed 2020’s figure of nearly 3,600. This is also despite China’s crackdown on its national companies listing abroad that struck a level of fear in investors with exposure to the country. China, which was the top target for US investors in 2018, fell to fourth after the United Kingdom, India, and Canada.
The reach of US investment abroad has become even more global in recent years. India will see more than 600 US investments in 2021 (more than double its 2018 count), Mexico and Brazil will see 2x and 3x their 2018 deal counts in 2021, respectively, and Australia has received more than double 2020’s US investor participation in 2021. Venture capital is growing as fast as, or faster than, the US within many markets across the globe, and US investors are making sure they are positioned to capitalize. Because overseas venture investment has become so global, the political risk for US investors has been diversified. As in 2021 with China’s policy changes, US dollars can quickly shift to other markets. We are also starting to see the high returns needed to make such investments viable generate at a higher cadence. In the past two years, 32 non-US companies have exited at a valuation of $5 billion or higher, 12 of those at $10 billion or larger. These exits will not only help grow the local markets but will also generate interest from deep-pocketed investors from other countries, including the US.