An almost two decade boom of physical cross-border expansion by venture-backed companies has slowed since the onset of the pandemic, according to an analysis combining data from fDi Intelligence and Crunchbase.

Global foreign direct investments (FDI) announced by private businesses with venture capital (VC) funding declined by almost a third in 2020, compared to a year earlier, according to data from fDi Markets, a database that has tracked greenfield investment since 2003.


Greenfield FDI projects — when a company invests into a foreign country and creates new jobs and/or facilities — planned by VC-backed firms in 2021 decreased by a further 13.6%, according to the latest figures. This is counter to the 4.8% increase in the total number of global FDI projects, according to the latest available 2021 figures.

"The pandemic certainly has changed the way that companies and start-ups have gone about their international expansion," says Chris Metinko, a senior reporter at Crunchbase, who covers enterprise tech start-ups, VC and innovation. "Start-ups in general now have a more distributed workforce. At those start-ups that don't require manufacturing or physical facilities, they may see less value in additional office space, which could explain the recent fall in FDI [by VC-backed firms]."

VC is a form of equity-based financing typically given to entrepreneurs and early-stage companies deemed to be innovative with high growth potential. Many start-ups that receive VC funding are not yet profitable, but investors back them in the hope they will be disruptive and become a big success, as was the case with Google.

Start-ups use the capital, expertise and contacts brought by VC investors to fuel their growth. They spend the invested money on key areas such as marketing, product development and hiring staff. Cross-border expansion undertaken by VC-backed firms is often a fundamental way to acquire and serve new customers. In fact, the past two years of declining global VC-backed foreign investment (VC-FDI) has been an aberration. 

In the 16-year period from 2003, VC-FDI progressively increased, picking up rapidly from the start to reach a peak just before the pandemic, according to fDi Markets.

In 2019, a record 1654 VC-FDI projects worth an estimated $23.4bn were tracked worldwide. Europe was the leading global region in 2019 with 46% of all inbound projects, followed by Asia-Pacific (23.8%) and North America (17.8%). The remaining 205 VC-FDI projects were spread across the rest of the world.

This data comes from fDi’s second study of global VC-FDI. Building on an original analysis published in June 2020, this study combines data from fDi Markets and Crunchbase, assessing almost 10,000 VC-FDI projects made since 2003.

Booming funding

The rise of VC-FDI has coincided with more capital being allocated to VC funds by institutional investors, as well as soaring funding rounds and start-ups valued above $1bn — commonly known as ‘unicorns’.

Global VC investment in 2021 totalled a record $687bn, up from $353.3bn the previous year, marking a growth rate of almost 95%, according to PitchBook. Global VC in 2021 was also more than ten-times the figure recorded a decade earlier.

“There’s also a record number of start-ups entering the venture life cycle,” says Kyle Stanford, a senior venture analyst at PitchBook. “Even in the face of interest rate and global economic pressures, venture is set up to withstand a short-term shock to the market.”

Amid a record-breaking environment in 2021, the way VC traditionally operates saw some seismic changes. This included deep-pocketed hedge funds such as Tiger Global investing heavily into venture-backed start-ups, as well as legacy VCs such as Sequoia Capital planning to change its fund structure.

“Unconventional venture investors are pouring money into venture-backed companies, fuelling the unicorn bubble and funding a whole range of businesses that are able to grow rapidly because their investors are subsidising their customers,” says Bill Janeway, a venture capitalist and economist who has written extensively on VC, including the book Doing Capitalism in the Innovation Economy.

Private venture-backed companies in the US, which is the birthplace of the modern VC industry, raised a total of $330bn in 2021 — roughly double the previous record set in 2020, according to PitchBook. 

But the US’s global share has been declining over time, from more than 80% of total VC funding before the financial crisis to around half in 2021. More capital has been progressively flowing mainly to start-ups based in Asia-Pacific and Europe, but more recently into Latin America, the Middle East and Africa.

Leading locations

Even as its share of global VC has declined, the US was unsurprisingly home to the most venture-backed start-ups making cross-border investments.

US-headquartered companies announced 30.4% of the almost 10,000 VC-FDI projects tracked since 2003. More than 50% of the US-sourced projects were made by start-ups based in the tech hubs of New York and the Bay Area, which includes San Francisco and Silicon Valley.

“It is small wonder that Silicon Valley stands as a shining model for emerging markets looking to diversify their economies and create jobs,” Christine Tsai, the chief executive of 500 Startups, previously wrote in fDi Intelligence.

The US was also the most sought after market to invest into by foreign venture-backed firms. A total 1810 VC-FDI projects worth an estimated $26.6bn were tracked in the US in the 19-year period.

Mr Stanford notes that for start-ups at later stages in the US, who already have a proven product and plan to go public, capital is often deployed to expand into other parts of the country.

“If the company has a physical product or service, such as Uber or Lyft, a lot of capital is used to move into different ecosystems,” he says.

On the other side of the Atlantic, the UK attracted the second-highest number of both inbound and outbound VC-FDI projects. This was buoyed by London maintaining its position as the top source and destination city among more than 1000 global cities.

Over the 19-year study period, more than 800 VC-FDI investments flowed both into and out of the UK capital, which is also home to Europe’s most developed venture ecosystem.

London-based tech start-ups raised a record $25.5bn in VC funding in 2021 alone — more than double the total recorded in 2020, according to a recent report by data provider Dealroom and the city’s development agency, London & Partners.

“The UK is a very advanced market from a VC perspective,” says Mr Stanford. “Being able to enter into that venture community is going to help companies continue to expand with access to capital and networks available there.”

Elsewhere in Europe, other capital cities with renowned tech hubs attracted a significant number of VC-FDI projects, including Paris (323), Berlin (202), Amsterdam (168), Dublin (121) and Madrid (114).

Singapore magnetised the largest number of projects (409) in the Asia-Pacific region, followed by Tokyo (213), Hong Kong (184) and Sydney (180). Meanwhile in China, Shanghai was the only city to attract more than 100 projects and make it into the top 20 destinations.

In the Middle East, Dubai was by far the favoured destination, attracting 177 VC-FDI projects over the period. While Tel Aviv trailed Dubai as a destination, the Israeli tech hub was a prominent source of projects.

Tech supremacy

More than two-thirds of the 9953 projects in this analysis were in broadly defined tech (software and IT services) industry, creating an estimated 251,508 jobs. Almost three-quarters of these projects were announced by software publishers outside of video games.

Half of the top 20 companies by VC-FDI projects fall within the broadly defined tech sector, including software companies such as Switzerland’s Acronis and US-based Automation Anywhere.

The prevalence of tech firms in the analysis is in part explained by underlying drivers. Mr Janeway says that a key transformational force for VC has been a “radical reduction” in the cost of tech experimentation.

“Given the ability to rent cloud-computing resources as required, and the availability of free open-source software for developing internet-based offerings, the cost of entry [for entrepreneurs] has declined radically,” he says.

Despite some major VC-FDI start-ups excluded from the analysis due to going public before December 1, 2021, such as co-working space provider WeWork, some remained. This included the pioneering hotel-hostel brand Selina, which offers a network of more than 130 properties worldwide, and was the most active investor in the study.

Selina is set to go public in the second quarter of 2022, as it anticipates a gain from the remote working trend accelerated by the pandemic. 

“Hotel brands need to combine adaptability, flexibility, and access over ownership in order to appeal to the post-Covid-19 customer,” Selina’s co-founder and CEO Rafael Museri previously wrote in fDi Intelligence.

Tech companies that facilitate deliveries were other active investors, including Barcelona-based delivery platform Glovo announcing 53 FDI projects in the period. Gorillas, a Berlin-based on-demand grocery delivery, has announced 17 foreign greenfield investments since being founded in May 2020.

Fintech was another well-represented tech vertical. Some 23 VC-FDI projects were announced by London’s digital bank Revolut in the period, followed by its Berlin-based rival N26 with 18 projects.

The majority of projects announced by venture-backed firms were into sales, marketing and support activities, followed by business services (11.1%) and headquarters (9.3%) operations, as well as research and development (8.4%).

Future outlook 

As money pouring into start-ups and early-stage companies increased up until 2019, so too did the international investments made by them. Aside from global VC-FDI falling in 2020 and 2021, the super-cycle of mega funding rounds is expected to continue at a high level. 

“We expect VC to continue to be very strong — maybe not at the same level as 2021, but certainly for it to stay high for the next quarter at least,” says Mr Stanford.

Even the first month of 2022 has already exceeded total funding in previous years. In the period up to February 4, 2022, more VC funding ($58.4bn) was poured into start-ups than in any year between 2003 and 2010, according to PitchBook. 

In the US alone, VCs have record high cumulative dry powder of $220bn — that is, capital ready to be deployed. Even some have a strong outlook for more funding, Mr Janeway calls for caution in this unprecedented time in the VC industry.

“Sooner or later, entrepreneurs and the venture capitalists that fund them are going to discover that business fundamentals still apply,” he says, referring to the fact many venture-backed start-ups are still not profitable or cash generating. 

“The environment we have been in is unique in the history of professional VC. The question is how long it will last.”


A list of more than 50,000 private companies with at least $500k of venture funding was generated from start-up database Crunchbase on 28 June 2021. The data from Crunchbase was matched with data from fDi Markets data through a fuzzy matching process by using the company name and website.

The resulting analysis includes 4407 venture-backed private companies that have announced at least one greenfield FDI project. It had a total of 9953 projects across 1088 destination cities worldwide. 

Every effort has been made to ensure the reliability of the VC-backed companies included within this analysis, as well as the greenfield investments made by these companies. Any private VC-backed companies that have subsequently gone public or been acquired before December 1, 2021 were excluded. It must be noted that this research is indicative of macroeconomic trends and is not intended to be exhaustive. 

The investment projects tracked by fDi Markets are constantly updated based on new intelligence and the underlying algorithms are constantly improving their accuracy over time.

This article first appeared in the February/March 2022 print edition of fDi Intelligence. View a digital edition of the magazine here