UD Round-Up #02: Born In The USA

The promise of the internet is unencumbered distribution. Kind of. The reality is that the reach the internet provides you depends on what you are trying to distribute. For physical products, your effective reach is likely to be local, or regional at best. For financial services, your reach is unlikely to exceed a handful of regions. The internet's promise of truly unencumbered, global distribution is only fulfilled when the product is purely software.

However, even though you can sell software to anyone anywhere in the world, it hasn’t necessarily been the case that you could *start* a global software business from anywhere in the world. There are a handful of exceptions like Spotify, Skype, UiPath, and Auth0 (Endeavor company), but the vast majority of software businesses still tend to emerge from Silicon Valley.

70% of global IT spend is outside of the USA, yet only 41% of investment in enterprise software businesses is outside of the USA. It is still the case that to build a global software business, you need access to finance and talent that is still largely concentrated in San Francisco. Outside of SF, particularly in emerging markets, the majority of investment goes to fintech or marketplaces, which by nature are often localized products. But software businesses do exist in these markets. They’ve just had to evolve to operate in a market that isn’t awash with capital and talent. In this Rest of World article, Joanne Yuan, of turn/river ventures, talks about her fund which specializes in investing in bootstrapped software businesses operating outside of Silicon Valley (link).

It could happen anywhere

If you had a magic wand and wanted to increase the chances of global software businesses emerging from anywhere in the world, you’d probably force VCs to invest and conduct due diligence over Zoom. Then you’d wave your wand again to make more companies embrace working from home and remote work.

Of course, all of this has happened in the last ~18 months. There have also been more secular trends like the rise of open-source software, increasing availability of venture capital in markets across the world, and the shift to software products that are pulled into companies by developers (vs pushed to companies through salespeople). It’s now increasingly likely that the next billion-dollar enterprise software companies will be born outside the US. In this Forbes article,