The past two years have brought significant reductions in US venture capital availability, averaging about $12.5bn annually, compared with $28bn in 2008 and more than $40bn in 2007. 

And, although technologies such as cloud computing create powerful capacity at affordable rates and many new business plans require minimal start-up funding, the data suggest an overall downward trend. In addition to tight capital markets, some entrepreneurs and their advisors point to increasing regulatory uncertainties as new and potential laws are turned into rules impacting finance, healthcare, environment, energy, internet and telecommunications, taxation, and so on. While some of these may create new opportunities, the net impact is likely more chilling.


Nevertheless, media rankings of the most promising new enterprises continue to suggest possibilities for special opportunities. Interestingly, a quick scan of a recent list of the top 50 new companies reveals that 35 of them were founded in California. Silicon Valley continues to generate the majority of new enterprises that are attracting investor attention.

It is no secret that while California may be a great place to start a business, many managers opt to grow their companies elsewhere. And, with the venture capital pools shrinking, where might these young companies go to get the funding they need to expand?

One source for expansion capital is close to home. A recent analysis of 18 large technology companies pointed to cash on hand totalling in excess of $250bn – 20 times the amount of venture capital raised last year. Look forward to those funds being used to scoop up winning enterprises. And, to the extent that cash is parked abroad, a tax repatriation holiday may increase the pace of acquisitions.

But another source of expansion capital may be the holders of dollars gained through sales of manufactured goods to the US (for example, China) and/or near record-level energy pricing. It is not an unreasonable strategy to use windfall cash to build longer lasting technology wealth. Maybe that is why the Russian Innovation Center has opened a new office in Menlo Park, California, not too far from Stanford and the venture capitalists on Sand Hill Road.

Daniel Malachuk works with business and government leaders on global direct investment strategies. He has advised many of the world's leading companies and served in the US public sector as director of White House operations. E-mail: