Survey Shows Venture Industry’s Outlook Brightening for 2011
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foreign limited partners in U.S. funds in the coming year, and 76 percent expect fundraising terms to favor LPs.
Among the findings of the survey:
—Fifty-one percent of the VCs say venture capital investments should increase in 2011. Twenty-four percent say the level will stay the same; another 24 percent predict a decline.
—As Heesen indicated, when venture capitalists were asked, “How will VC investment dollars fare by industry in 2011?” more VCs expect investments in information technology to increase than in the life sciences or cleantech sectors. And which IT sectors do they view as hot? In consumer Internet and digital media, 82 percent of the VCs expect investments to increase. Eighty percent predict investments will increase in cloud computing, 77 percent anticipate an increase in health IT funding, and 66 percent predict VC investments will rise in mobile and telecom.
—In the life sciences, VCs were divided on the prospects for 2011, with nearly equal numbers of venture capitalists predicting investments in biopharmaceuticals will increase (33 percent), stay the same (34 percent), or decline (33 percent). The outlook for medical devices was almost the same with 35 percent predicting an increase, 35 percent predicting investments will remain the same, and 30 percent predicting a decline.
— Of the VCs who plan to invest outside the U.S., 26 percent anticipate investing in China, 19 percent in Western Europe, and 18 percent are looking for deals in India. Another 11 percent indicated an interest in investing in Latin America in 2011.
—Most venture capitalists (90 percent) and CEOs (84 percent) expect the startup ecosystem in Silicon Valley will improve or stay the same. The predictions are similar for the startup ecosystems in New England and New York, although almost half the VCs (49 percent) say the startup ecosystem in New England will improve, with another 36 percent saying it will stay the same. Asked to name a region outside of Silicon Valley, New England, and New York that is poised for growth, Southern California ranked highest, garnering 21 percent of the VCs.
—Just over two-thirds (67 percent) of the VCs predict that venture-backed IPO volume will increase in 2011. Even more VCs (72 percent) anticipate that the volume of tech IPOs will increase. In the life sciences, only 36 percent of the VCs expect to see increased IPO volume, while 45 percent predict that the volume will remain the same.
—Most VCs (82 percent) also expect to see a higher number of acquisitions in 2011, with most of the buyout activity focused on the tech sector. While 84 percent of the VCs see more M&A deals in the tech sector, just 59 percent expect to see an increase in buyouts among life science companies.