Investors urge emerging markets to back local startups, not just Silicon Valley

By Arjay L. Balinbin, Associate Editor

MADRID — Countries seeking to build sustainable startup ecosystems should ensure that local investors support homegrown companies rather than directing most of their capital to established technology hubs such as Silicon Valley, global investors said.

Lucy Chow, an investor, author, and ecosystem builder based in the United Arab Emirates (UAE), said local capital is critical to helping startups grow into globally competitive businesses.

“Please keep some of your capital for your backyard,” Ms. Chow said during a June 5 media roundtable on the sidelines of South Summit Madrid 2026, co-organized by IE University.

“I don’t care if you’re a family office, a VC, an angel. I don’t care if it’s 1%, 10%, whatever you can.”

While investors are often drawn to major technology centers, countries seeking to foster innovation should also support domestic entrepreneurs, she said.

“Yes, it’s bright and shiny over in Silicon Valley. Yes, there are great companies to invest in, but please make sure you grow your own ecosystem,” she added.

Ms. Chow said startup ecosystems are unlikely to produce major exits without local investors willing to provide early-stage funding.

“You’re not going to get those exits unless you have the first checks written by people who know the ecosystem the best,” she said.

Her remarks came in response to a question on lessons from the Middle East and North Africa (MENA) region, where venture capital activity has expanded significantly over the past decade, particularly in the UAE and Saudi Arabia.

AI, DATA CHANGING INVESTMENT PROCESS
Investors also said technological advances are reshaping how venture capital firms evaluate opportunities.

Asked by BusinessWorld how investment decision-making differs from five or 10 years ago, Jörg Goschin, chief executive officer of Germany-based KfW Capital, cited the growing use of data, specialization, and artificial intelligence (AI) in investment processes.

“We’re starting with more data points,” he said.

Mr. Goschin said the venture capital industry has become increasingly specialized, with funds focusing on narrower sectors and technologies than in the past.

He added that AI is helping investors process large amounts of information more efficiently, particularly during due diligence.

“When you start an investment process, you usually start with a data room,” he said.

Tasks that previously required analysts to spend days reviewing documents can now be completed much faster using AI tools, he added.

“The investment process is certainly also evolving,” Mr. Goschin said.

Despite those changes, investors said the fundamentals of venture capital remain largely unchanged.

“We’re still looking for great teams wanting to build great companies in markets that are very favorable and can generate big exits, because the venture model only works if capital gets recycled and funneled to the next set of great companies,” said Renaud Visage, co-founder and general partner at Slate VC and co-founder of Eventbrite. “What’s changed is the bar.”

Mr. Visage also said founders today are expected to be more experienced, financially sophisticated, and better prepared to scale businesses in an increasingly competitive global environment.

“The bar is continually rising as the competition becomes even more global than it was,” he said.

Ms. Chow said that while AI and data have become increasingly important in investing, human judgment remains essential.

“Ultimately, though, the decision is still going to be that in-person, face-to-face decision,” she said.

“You can’t take away the human decision point of whether or not to invest in the founder in front of you.”

Mr. Goschin also said environmental, social, and governance (ESG) considerations have become more deeply integrated into investment frameworks over the past decade.

“ESG for us, for example, is a risk tool,” he said.

“Certainly, having ESG structurally integrated into the investment process is something which wasn’t there like 10 years ago,” he added.