I had a great conversation recently with David Siemer of Siemer & Associates, a boutique investment bank and early-stage venture capital investor — Siemer Ventures — that's based right here in Southern California. The merchant banking side of their business is "new" old school investment banking, centered on raising capital for clients and providing advisory services. In other words, investment banking the way it used to be, before trading of the sort practiced by the Big Boys — Goldman Sachs, Morgan Stanley — became a profit-driver.
Not surprisingly, David Siemer wanted to get into venture capital, as well. What's interesting about this part of the business, which focuses on digital media, is the firm's bullishness on Asia and India. Siemer Ventures was started in 2007 and currently has its main office in Santa Monica, which is beginning to re-establish the "Silicon Beach" critical mass of tech companies that we first saw back before the dot com crash. For what it's worth, New York is also picking up steam. Silicon Valley isn't the only place to go for venture funding anymore. (Not that it ever was, but it's always been easy to get that impression.)
But that's all close to home. Siemer and I discussed the Consumer Electronics Show (CES) — he had just returned from Las Vegas — as well as the nature of his firm's VC niche. Siemer Ventures looks to fund startups at a relatively modest scale, but the firm likes to see companies that have already attracted some investment before it puts in, say, $500,000, usually as part of a group of VCs. Siemer then looks to exit its investment by passing the company onto another VC that can provide later-stage money (And more of it!) or by selling the startup.
This is all pretty standard for a firm of Siemer's size. But what really intrigued me about their business was the desire to develop the Asian and Indian market. India was of particular interest to me. Siemer somewhat confirmed my thesis that while China may have captured all the attention globally, given its expanding manufacturing base and rapid growth, India could be a better incubator of tech talent.
This isn't to say that China can't do the innovation thing. That's a negative cliché about the Middle Kingdom. However, India has certain obvious — and very positive — differentiators.
Indians will often look at China's success and wonder why they haven't experienced something similar. This has led to questions about India's democracy, versus China's command-and-control model. If the Chinese want to make something happen, they...just do it. In India, everything needs to be debated and submitted to messier, 18th-century-style Western democratic system.
Of course, that's just the environment you need to get startups to thrive. Siemer has recognized that VC in India could be poised to be to the 21st century what VC in Silicon Valley was in the 1980s and 1990s — a business with massive upside. Siemer is establishing an office in India, which makes a lot of sense. The country fits into the firm's existing investment thesis and could end up providing more bang for the buck, when it comes to Siemer's investing style. Indian startups may not yet be well-established enough for the heavy hitter of VC to move in. So there's an advantage to be obtained by taking the early risk.
This is a pretty good example of how something you might not think of as being made in LA — venture investing — is being exported to the developing world. And in the process creating a business revolution.