Knowledge@Wharton: "Where Markets Are Hot: Opportunities for Venture Capitalists Across the Globe"

From Knowledge@Wharton:

From China and India to Southeast Europe and Latin America, the rise of huge young populations of middle class consumers is creating rich opportunities for private equity and venture capital investors. Top targets for investment in these emerging markets include companies in the Internet, financial services and clean technology sectors.

These were among the key points of venture capital panelists, many of whom are currently working in developing countries, at the 2011 Wharton Private Equity and Venture Capital Conference. Participants on a panel titled "Challenges and Opportunities for Global Venture Capital" addressed the developing areas of China, India, Southeast Europe, Turkey and Latin America during the session, which was moderated by Jeanne Metzger, director of marketing for the National Venture Capital Association in Washington, D.C....

...Southeast Europe and Turkey
Financial services provide the most exciting opportunities for investment in Southeast Europe and Turkey, said Denis Kalenja, founder and managing partner of Montague Capital Partners, which has offices in New York City and Research Triangle Park in North Carolina. Commercial banking has performed well in the region, which Kalenja said still needs more financial services such as asset management firms. He added that distressed real estate, including beachfront property on the Adriatic coast of Croatia, could provide a good opportunity for investors who are familiar with the area.

Southeast Europe remains a fragmented market made up of many small countries with populations that speak different languages, Kalenja noted. The region's industries thus have a critical need to consolidate to build economies of scale and generate value for investors. But in the boom years before the global financial crash, local executives thought they could build companies on their own without partnering across borders, he added. Now executives are more willing to consider mergers. "The people in this region realized they cannot do it themselves. Finally, the region is ripe for investing and consolidation."

Venture capitalists who come to Southeast Europe can easily find three or four families or entrepreneurs that dominate particular industries, he said. This can provide a starting point for entering the market with investments that help businesses consolidate.

Investors based in Western Europe are increasingly looking toward the southeast for higher returns, Kalenja noted. But such investors often lack experience in local markets. Meanwhile, many of the most talented and highly educated businesspeople in Southeast Europe and Turkey are moving in the opposite direction by relocating to larger markets in Western Europe and North America. This leaves fewer native-born entrepreneurs who are willing to stay in the region or return from abroad to launch new companies....MORE