Risks of International & Emerging Market VC
International and emerging market venture capital provides investors with an opportunity to increase IRR, improve liquidity and diversify assets. Venture capital also accelerates economic development in international and emerging market countries since it catalyzes company formation and growth thereby stimulating job creation.
However innovators pioneering such schemes for these markets inevitably expose themselves to trial and error costs. Quasi-equity structures are typically used to generate early cash returns to satisfy institutions need for liquidity, but it takes time for staff to develop the intimate knowledge and the investment nuances of this strategy to improve IRR and reduce risk.
The capital markets are not an exit option for SME investments in many foreign countries, so investors must plan for liquidity from alternative sources like corporate buyers. But opportunities for mistakes exist as investment officers approach corporates as potential acquirers without attracting them first as customers/partners in the investee's business. Getting the corporates to conduct business with the investees should be the building block strategy to transform them into a source of future liquidity.
Click to read project summaries of how IVI solved these risks and created long-term value for our investors, our clients and our portfolio companies.