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Watch the full video of our latest Venture Underground episode where we break down how governments can build thriving VC ecosystems.
About ten years ago, an entrepreneur in Latin America noticed something absurd: if you bought a car and wanted insurance, you might wait two months just to get the paperwork.
About ten years ago, an entrepreneur in Latin America noticed something absurd: if you bought a car and wanted insurance, you might wait two months just to get the paperwork.
The solution was obvious. Build a company that delivers insurance the next day-or even the same day. The startup did exactly that, creating a courier network that could reach customers anywhere in the country.
The company exploded. Of course it did. Would you rather wait two months or get your insurance card tomorrow?
But then they hit a wall.
"They became huge because you can buy insurance and wait two months, or you can buy insurance and get it the next day," says Adeo Ressi, CEO of Decile Group. "But they couldn't scale."
This is the capital ceiling-the invisible barrier that kills promising companies in regions without developed venture capital ecosystems. Great idea, strong execution, massive market demand, and absolutely no capital to scale.
The Pattern
Ressi has seen this pattern everywhere through his work building startup ecosystems across 200+ cities with the Founder Institute and launching nearly 1,000 venture funds through Decile Group.
The entrepreneurs are there. The ideas are there. The market opportunities are often larger than in developed markets-precisely because incumbents are delivering such poor service.
What's missing is capital.
"The biggest gap in most countries is not founders, ideas, or local opportunities for growth businesses," Ressi says. "It's capital to scale them."
That Latin American insurance company? Once venture capital finally arrived, they broke through the ceiling and became a billion-dollar company. The pattern repeats everywhere: companies hit the glass ceiling, venture comes in, billion-dollar companies get formed.
But for every company that eventually finds capital, countless others simply die waiting.
Rocketships Into Concrete
The imagery Ressi uses is visceral: "Entrepreneurs build these incredible companies that start to take off, and then they hit a concrete ceiling. These rocketships smash into these walls of concrete only because there's no capital to keep up with their growth. In an ecosystem like Silicon Valley, they'd be unicorns."
Instead, they stall out. Or they leave.
This is the hidden cost of venture deserts-not just the companies that fail, but the companies that succeed and then relocate to find growth capital. Flipkart, India's e-commerce giant, redomiciled to Singapore specifically because that's where the VCs were.
The value creation doesn't disappear. It just happens somewhere else.
The Israel Example
The alternative is possible. Israel-a country the size of New Jersey in a hostile region-built a venture ecosystem so effective that in the 1990s, more Israeli companies went public on NASDAQ than companies from any other city outside Silicon Valley.
More than Boston. More than New York. More than entire countries.
"Why is Israel the regional leader in the Middle East?" Ressi asks. "They have a killer venture capital ecosystem and are pretty much neck and neck with the United States. Think about what a powerhouse-a tiny little country in a hostile area-and how much GDP and success it has. What does it have that their neighbors don't? Everyone has talented people. Everyone has entrepreneurs. In fact, some neighboring countries have better entrepreneurs than Israel. But Israel has a thriving venture capital ecosystem."
What Entrepreneurs Can Do
For founders stuck below the glass ceiling, the options are limited but real:
- Go where the capital is. This is what Flipkart did, an Indian company that redomiciled their company in Singapore to raise. It’s what countless others have done. If your local ecosystem can't fund your growth, find one that can.
- Build for global from day one. Structure your company to be attractive to international VCs, even if you're operating locally.
- Advocate loudly. Governments respond to organized pressure. Entrepreneurs in Singapore, Chile, and Israel pushed for the policies that created their ecosystems.
- Don't wait. The gap between venture hubs and venture deserts is widening every year. The time to act-whether by relocating, restructuring, or advocating-is now.
The capital ceiling is real. But it's not permanent. It breaks the moment capital arrives.
The question is whether that capital will arrive in your city-or whether you'll have to go find it somewhere else.