The National Venture Capital Association recently published their annual survey – Venture View 2011: Venture Capital Predictions Survey.
Overall the survey points to more venture investing in 2011 although I don’t expect much of this venture investing to be focused on seed or start-up capital. Although 49% of VCs report that they plan to invest in expansion and seed investments, there is no differentiation in the study to say how many plan to invest in seed investments, nor does it break out the percent of funds to be invested in seed investments. My recent experience is showing the majority (80%+ or more) of funds are going to later stage companies, very little (I’m estimating less than 5% of all VC funds) are going towards true seed capital and innovative start-ups. Most seed money is also being invested in industry piers or industry experts with substantial market and industry expertise.
I believe VCs keep forgetting that companies like Microsoft, FaceBook, Google and others were all started and founded by individuals with completely new ideas and new products. Personally VCs have moved too much towards investing and moved too far away from innovation and new products.
I see many start-ups looking for alternative funding sources to start their companies, the most popular being friends and family, borrowing from retirement funds, debt financing or contract monetization (a fancy word for financing a sale or contract already in place). Although the SEC has stiffened it’s requirements, new companies may find cheaper funds by taking their start-up organization public. A daunting task, but one that can provide some security for investors when properly organized.
Please contact Alveris if you need help getting your new products to market.
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Venture View 2011: Venture Capital Predictions Survey.
On the rebound. According to a survey of more than 330 venture capitalists and 180 CEOs, the economy and venture capital investing are beginning to improve, as a stronger exit market and renewed confidence in the IT sector engender optimism for 2011. The December survey of US financiers and CEOs of VC-backed enterprises is done annually by National Venture Capital Association and Dow Jones VentureSource. Over 50% of the venture capitalists polled expect venture investment to increase in 2011; 24% predict it will stay the same; and 24% anticipate a decrease. A slight majority of venture funds (51%) will be invested in later-stage companies, while 49% will be in expansion and seed investments. Only 30% of the early-stage investors plan to co-invest with angels. CEOs are even more bullish, with 58% predicting an increase in venture investing. Hiring and spending should rise, since 82% of the CEOs plan to increase their headcount in 2011, 66% say technology spending will increase, and 64% plan a round of financing. Over half of the CEOs said that they do not plan to complete an acquisition, but 50% think their total compensation will rise in 2011.
Where the money is going. In a departure from years past, venture capitalists are expecting the strongest sector for investment to be information technology with an emphasis on consumer internet and digital media (82%), followed by cloud computing (80%) and mobile/telecom (66%). Healthcare IT will be a strong sector since 77% of the venture capitalists predict that investments in this sector will increase. The fear of froth in clean tech investing is apparently subsiding: just over a third of the respondents foresee an increase in energy investment. While some 60% of the CEOs plan to increase their revenues overseas, slightly less than half of the venture capitalists anticipate investing in foreign startups. Those who do invest overseas are targeting Asia, with 25% focusing on China and 18% on India. China will fare better than India in 2011, according to 64% of the venture capitalists and 59% of the CEOs in the survey. Nineteen percent of the venture capitalists are planning to invest in Western Europe. Only 11% expect to invest in Latin America, yet that percentage reflects interest in an area that has not been recognized for its investment opportunities.
Entrances and exits.Both groups are bullish on the 2011 economy, as about two-thirds predict the US economy will improve. Dow Jones VentureSource notes the close link between increased venture investing and an improved economy. Spending venture capital on salaries, technology, and other businesses will help to strengthen the economy. The CEOs are bullish about their own company’s valuation; 77% expect the valuation to increase in 2011. About half of the venture capitalists anticipate valuations increasing for startups. Centers such as Silicon Valley will remain the most active area of investment, although other regions were cited as well, most notably Southern California, the Rocky Mountain region, and the Mid-Atlantic.
Looking at the economy.Both groups are bullish on the 2011 economy, as about two-thirds predict the US economy will improve. Dow Jones VentureSource notes the close link between increased venture investing and an improved economy. Spending venture capital on salaries, technology, and other businesses will help to strengthen the economy. The CEOs are bullish about their own company’s valuation; 77% expect the valuation to increase in 2011. About half of the venture capitalists anticipate valuations increasing for startups. Centers such as Silicon Valley will remain the most active area of investment, although other regions were cited as well, most notably Southern California, the Rocky Mountain region, and the Mid-Atlantic.
Abstracted from Venture View 2011: Venture Capital Predictions Survey, published by National Venture Capital Association
