Bridging the Emerging Markets Internet Divide
Brandman, James, Global Finance
Western venture capitalists are promoting the growth of the Internet market worldwide.
There are plenty of doom merchants who claim that, far from promoting economic and social development, the Internet is yet another tool for widening the gap between developed and developing countries. The new economy's self perpetuating cycle, where investment generates efficiency that frees more capital for investment, is not taking root in the developing world as quickly as many would like, and the rapid growth of wealth in the West is exaggerating the differences.
But there are signs that capital is beginning to flow into newer markets with the aim of developing the Internet worldwide. Ironically, it is because the developed markets are so saturated with capital that this is taking place. Venture funds are looking ever further afield to find the next home run.
In February this year, for example, the International Finance Corporation and Japan's Softbank announced a joint venture designed to initiate start-ups in more than 100 developing countries. Together, they are investing $500 million in Softbank Emerging Markets (SBEM) and Softbank's Latin America and Chinese Internet investment funds to incubate Internet-related businesses in developing nations.
SBEM will invest seed money and provide technological, legal, and management support to turn ideas into businesses. In doing so, it will enter partnerships with various industry leaders and local partners and provide risk capital and support for entrepreneurs. By transferring Internet technologies and business models from developed to emerging markets, the project hopes to generate investor interest in emerging market Internet companies, which should help lower the price of Internet access and so boost subscriber levels.
This is not the only attempt to preempt or propagate an Internet explosion in emerging markets. Media investment groups CMGI and Hicks Muse Tate & Furst of the United States and Hong Kong's Pacific Century CyberWorks are jointly investing up to $1.5 billion in a new venture capital partnership to support the development of Internet firms based in Asia, Europe, and LatinAmerica. The joint venture, @Ventures Global Partners, will make investments in Web businesses spanning four core disciplines: content, community, commerce, and the software and services necessary to link Web businesses to their users and customers. …