I really enjoyed this perspective. The idea that the infrastructure that makes a technology investable is itself a product of geography is such an important one. It’s a great reminder that backing deep tech isn’t just about evaluating the technology or the team, but understanding the ecosystem around them and, where necessary, being willing to help build what’s missing. Really insightful read. 👏🏾
Israel is the case study missing from this, and it cuts both ways.
Yozma in 1993 was almost precisely what you describe: $100 million of state money co-investing alongside foreign VCs, with the government absorbing part of the early risk. Venture funding went from $58 million in 1991 to $3.3 billion by 2000. The connective tissue was deliberately manufactured, and it worked.
The part worth sitting with is what happened next. The infrastructure produced world-class companies, and most of the value left. Exits went to US acquirers or US listings. Israel's own public market captures only a slice of what its ecosystem generates.
So building the missing infrastructure may be necessary without being sufficient. You can create the pipeline and still watch the returns land somewhere else, which seems like the harder problem for an investor planning to do that work.
I completely agree. While direct comparisons should be made cautiously, this is precisely the challenge that other countries such as France, Singapore, Switzerland and others have been trying to solve for the past three decades. Ultimately, it may be less about identifying the “best” ecosystem than understanding how their respective strengths can complement one another.
It remains difficult to compete with the depth and magnetism of the US market. For Israeli startups, expanding into the US is an almost obvious step: its tech, business and financial elites are closely interconnected, while Israel’s domestic market cannot offer comparable scale. The EU, the Middle East and Southeast Asia, meanwhile, remain fragmented and complex. For many startups, the US is still the principal large, unified, English-speaking commercial market, and one where the depth of capital has no equivalent.
The more relevant question, then, is which capabilities can (and should) remain at home, from R&D to selected operational functions, and what mechanisms governments can design to ensure that the value generated by their initial support continues to benefit the domestic ecosystem. That's a tricky one. And the balkanization of the world today is again changing the equation.
The important implication is that “capital efficiency” is not an intrinsic property of a company. It partly reflects how much of the surrounding ecosystem the company is forced to recreate internally. Two identical technologies can therefore deserve very different financing plans.
Great article @ Foghor!
Love the comparison between SEA and MEA, thanks Foghor
Interesting aspect, thank you Foghor!
I really enjoyed this perspective. The idea that the infrastructure that makes a technology investable is itself a product of geography is such an important one. It’s a great reminder that backing deep tech isn’t just about evaluating the technology or the team, but understanding the ecosystem around them and, where necessary, being willing to help build what’s missing. Really insightful read. 👏🏾
And Foghor has not yet explored how these geographies might be combined to create some cross-border magic for early-stage startups!
Israel is the case study missing from this, and it cuts both ways.
Yozma in 1993 was almost precisely what you describe: $100 million of state money co-investing alongside foreign VCs, with the government absorbing part of the early risk. Venture funding went from $58 million in 1991 to $3.3 billion by 2000. The connective tissue was deliberately manufactured, and it worked.
The part worth sitting with is what happened next. The infrastructure produced world-class companies, and most of the value left. Exits went to US acquirers or US listings. Israel's own public market captures only a slice of what its ecosystem generates.
So building the missing infrastructure may be necessary without being sufficient. You can create the pipeline and still watch the returns land somewhere else, which seems like the harder problem for an investor planning to do that work.
I completely agree. While direct comparisons should be made cautiously, this is precisely the challenge that other countries such as France, Singapore, Switzerland and others have been trying to solve for the past three decades. Ultimately, it may be less about identifying the “best” ecosystem than understanding how their respective strengths can complement one another.
It remains difficult to compete with the depth and magnetism of the US market. For Israeli startups, expanding into the US is an almost obvious step: its tech, business and financial elites are closely interconnected, while Israel’s domestic market cannot offer comparable scale. The EU, the Middle East and Southeast Asia, meanwhile, remain fragmented and complex. For many startups, the US is still the principal large, unified, English-speaking commercial market, and one where the depth of capital has no equivalent.
The more relevant question, then, is which capabilities can (and should) remain at home, from R&D to selected operational functions, and what mechanisms governments can design to ensure that the value generated by their initial support continues to benefit the domestic ecosystem. That's a tricky one. And the balkanization of the world today is again changing the equation.
The important implication is that “capital efficiency” is not an intrinsic property of a company. It partly reflects how much of the surrounding ecosystem the company is forced to recreate internally. Two identical technologies can therefore deserve very different financing plans.