500 Global beginnings
As venture capital investors active in over 80 countries*, 500 Global focuses on identifying opportunities in economies around the world. 13 years ago, when 500 Global first got its start, there was little data that supported that it would be a worthwhile endeavor to look beyond mature markets. In fact, some of the data available at the time may have even suggested the opposite.
Despite this, at the time, we observed a number of early trends in technology developing: New populations were coming online. Smartphone penetration was growing. Internet connectivity was getting cheaper. Software engaging billions of people around the globe was emerging. New economies were rising.
The 500 Global Rise Report methodology
The 500 Global Rise Report is organized into four primary narratives: the Rise of the Next Internet Users, the Rise of the Next Global Companies, the Rise of the Next Economies and the Rise of the Next Sectors. Within each narrative, we collected and analyzed a range of third-party datasets to quantify global technology trends. Here’s a look behind the scenes at how we did it. Please refer to the full Rise Report (here) for further information on methodology including detailed sources and notes.
Part I: Rise of the Next Internet Users
In the Rise of the Next Internet Users, we began by studying the historical and projected evolution of global internet users. According to Euromonitor, by the end of 2023 there are projected to be 5.0 billion internet users online. By 2040, 3.0 billion new internet users are projected to come online.
Subsequently, we developed a framework to capture the compounding effects that we’ve observed across a number of data points on software, hardware, and connectivity. We’re calling this framework the “Global Tech Stack.” We use the framework of the Global Tech Stack as a tool for understanding how much more value may be created in the next decade.
Part 2: Rise of the Next Global Companies
In the Rise of the Next Global Companies, we analyze technology companies across stages, from startup through tech giant.
First, we studied private companies. We used Pitchbook data to show that startup activity is becoming more global: the number of countries with startup activity has increased over 5x since 2000. Furthermore, Pitchbook data showed the same for Unicorns: the number of countries with Unicorns has increased by 55x since 2007.
Next, we studied public companies. We mined data from company filings of a sample of publicly listed companies to show that based on median data, the share of revenue from outside the U.S. generally increases as tech companies scale. More specifically, we observed that our sample of companies valued at +$100B have 2.4x higher share of revenue from outside the U.S. relative to our sample of companies valued at +$1B.
Subsequently, we asked ourselves the question: if we look at the top 5 tech giants by market cap, what share of revenue comes from outside of the US? Based on data from company filings, of the three tech giants who report U.S. revenue separately, the median revenue share from outside the U.S. was 53%.
Part 3: Rise of the Next Economies
In the Rise of the Next Economies, our objective was to highlight a larger opportunity set of economies beyond the U.S. and China.
We looked at three metrics to define our sample of economies: scale, growth and political stability. Data for scale and growth were pulled from IMF data as of April 2023. Data for political stability was drawn from the Political Stability index from the World Bank as of 2021.
First, we used the IMF data to filter the list of global economies into those growing faster than the US based on 5y projected real GDP growth ≥1.75%. Second, we ranked these economies by 2027E nominal GDP. Finally, we excluded economies with a percentile rank of <2 percent on the political stability index. We selected the top 30 of the resulting list of economies, with the top 3 economies by 2027E GDP being India, Canada and South Korea. These are our “Rise 30.”
We then developed two metrics to help us further understand the state of the venture market in each of the Rise 30. The first metric we call “Venture Penetration”, defined as venture funding dollars invested in any given country (based on PitchBook data), divided by that country’s nominal GDP (based on IMF data). The second metric we call the “Venture Funding Gap”, defined as the U.S. Venture Penetration less that of a given country. We did this with the intention to proxy the amount of venture funding any given country would need to approach the same Venture Penetration as the U.S.
As a preview of our analysis, we observed that based on 2022 data, two Rise 30 Economies – Singapore and Israel – have a higher Venture Penetration than the U.S. Check out the full Rise Report (here) for more.
Part 4: Rise of the Next Sectors
In the Rise of the Next Sectors, we seek to understand the sequence of +$1B sectors in economies around the world. We did this with the intention to observe any patterns that may exist in the sequencing of +$1B sectors, patterns which may provide clues to what sectors may rise next.
First, we used PitchBook data to pull a list of all +$1B tech companies in a given economy. We then mapped each +$1B tech company to the year in which they reached +$1B in valuation as well as to its sector. Finally, we mapped these data points onto a chart, where we could observe the sequence in which the first +$1B tech company in each sector rose.
As a preview of our analysis, we observed that there was a different pattern in sequencing of +$1B sectors based on income groupings of economies. We observe that Software is most often the first to rise in high-income economies. On the other hand, Ecommerce is most often the first to rise in middle-income economies. Check out the full Rise Report (here) for more.
We are excited to share our research and analysis through the 500 Global Rise Report — to invite stakeholders from across the ecosystem into the conversation around the next decade of global technology.
We want to extend a special thanks to a small team of researchers within 500 Global – including Chrissy Hu, Junn Tang, Omar Nassar and others – who, over the past nine months, have diligently crafted this report that is now publicly available to investors, entrepreneurs, and fellow tech industry enthusiasts around the globe.
Explore the 500 Global RISE REPORT in which we present new ways of measuring, pacing and understanding the ever-changing world of technology in order to uncover overlooked opportunities and for further context, notes, methodology, and sources regarding the data points cited in this article.
*NOTE: THE INFORMATION PROVIDED IS BASED ON LOCATIONS OF PORTFOLIO COMPANY OPERATIONS AND IS AGGREGATED ACROSS ALL FUNDS ADVISED BY 500 GLOBAL (EXCLUDING SUB-ADVISORY SERVICES). ALL FIGURES ARE BASED ON INTERNAL ESTIMATES AS OF 30 JUNE 2023 (UNLESS OTHERWISE NOTED) AND HAVE NOT BEEN EXTERNALLY VERIFIED. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RETURNS