When it comes to business, Joanna Gallanter is an internationalist at heart.
The founder of San Francisco venture capital firm Venture Strategy Group is one of 100 up-and-comers from around the world tagged by the World Economic Forum as a global leader of tomorrow. She will be in Davos, Switzerland, tomorrow at the forum's 30th annual meeting, rubbing shoulders with the cream of international business and government.
But like many managers of U.S. venture capital funds these days, Ms. Gallanter prefers to keep her investments close to home.
"You're seeing more and more of a hesitation to do investments that aren't right in your back yard," Ms. Gallanter said in an interview.
U.S. venture funds are awash in a sea of cash right now, as the siren call of the Internet draws more investors and entrepreneurs eager to take their money.
As a result, most venture capitalists have more than enough opportunities on their home patches and no desire to stray even into neighbouring regions, let alone foreign markets such as Canada.
Canadian entrepreneurs who want to tap into these pools often have to move where the money is or count on the growing but still relatively small number of domestic private equity sources. A handful of firms are doing cross-border deals -- most of them on a scale too large to suit the needs of a Canadian startup.
Venture Strategy, financial backers of which include prominent technology investment banker Bill Hambrecht, puts capital in Internet companies at their earliest stages.
Unlike many larger funds, it has targeted smaller financings of the kind many Canadian companies are seeking -- with typical initial investments of $1-million (U.S.) to $2.5-million.
Noting that Venture Strategy partners sit on more than 20 boards, Ms. Gallanter said it would be impossible to stretch the firm's managerial resources further.
"How am I going to manage an investment that's in Toronto when I'm in San Francisco? Frankly, I can't take that kind of time."
This is a typical situation for U.S. venture capitalists, who talk a better global game than they play, say international bankers and fund managers.
"Only when there's a scarcity at home do U.S. investors look outside the country," said Francis McInerney, a principal with North River Ventures Inc., a New York firm that invests in telecommunications businesses. "Silicon Valley investors don't like to look outside the valley."
His firm put together an incubator involving some heavy-hitting investors from three countries, and even they insisted the project be based in Palo Alto, Calif.
Similarly, Mr. McInerney said he has talked to major investors in New York who will not venture outside the city's new media hotbed, dubbed Silicon Alley. Another venture fund manager based in Atlanta will not go beyond Georgia and neighbouring southeastern states.
Northwest Venture Associates of Spokane, Wash., sticks to investments in Oregon and Washington, said managing director Tom Simpson.
But although Northwest is precluded from investing in foreign companies by the small-business funding regulations under which it is set up, Mr. Simpson said he sees a lot of terrific business plans coming out of Vancouver.
He doesn't buy the argument that funds are too strapped for management to take on such deals.
"In order to be a leading venture fund and have a sustainable track record, you can't use the excuse that your plate is too full," Mr. Simpson said. "If it is, you should bulk up and hire more people."
Private equity firms that do look seriously at Canada -- and these include some major U.S. players such as Bain Capital, Goldman Sachs & Co. and the merchant banking arm of Donaldson Lufkin & Jenrette -- look to take big stakes in such exploding sectors as telecommunications.
They also look for clearly marked exits for their money. The lack of a Nasdaq-type market in Canada and a dearth of potential strategic buyers for the company down the road can be definite roadblocks to investments from U.S. funds, money managers say.
"Venture capitalists like 'exitability,' " a Wall Street fund manager said. "The capital markets are thinner in Canada. That makes it harder to raise money from diverse sources. There isn't enough high-risk capital. And there might be only one or two companies capable of buying you out," which all but eliminates the chance of a lucrative auction.
Some U.S. venture funds want Canadian entrepreneurs "to dress up as Americans, open an office in California and get a listing on Nasdaq. Then, they'll talk," said one investment banker who has done deals on both sides of the border.
One solution is for U.S. venture funds to team with Canadian partners, said Paul Cataford, managing director of BCE Capital, the Toronto-based venture capital investing arm of BCE Inc., which is fostering just those kinds of relationships on both sides of the border.
"It's difficult to do earlier-stage investing from a distance," Mr. Cataford said in an interview. "At that stage, companies need a lot of hand-holding. And that requires that you're local so you can see them on the way home from the office."