Global LP’s: Good or Bad?

While reading NVCA’s report on VC predictions in 2009, one particular section stood out:

While 96 percent of VCs predict that more venture firms will not be able to raise money in 2009, a lower percentage, 85 percent of respondents, believe institutional investors will reduce commitments to venture capital asset class.

“While many existing institutional investors are struggling with their allocations and future investment decisions, we will see new limited partners, many from overseas, enter the U.S. venture capital industry, said Heesen. “Despite the fodder, we do not anticipate massive failures of limited partners to make capital calls. Many will sell their positions on the secondary market out of necessity. Yet, that will just change
the mix and allow other institutional investors access to funds they could not access in prior cycles. High quality venture firms will be adequately funded going forward.”

I’ve seen new LP’s spawn out of nowhere first-hand. Speaking with other local VC’s, it seems that many dignitaries from the Middle East and China are jumping on the opportunity to take positions in venture funds of a struggling U.S. economy—funds that they may have not had access to 10 years ago.

I think it’s an interesting concept to use non-U.S. money to create U.S. jobs to then make more money for non-U.S. entities. Yet, with the gloomy 2009 outlook, would we be helping or hurting foreign investors?