More Capital for Startups? VCs, CEOs Forecast Growth

Venture capitalists and CEOs are optimistic about 2011 – many expect more funding, hiring, higher salaries, and sales – according to a new survey. However, there wasn’t unanimity over forecasting the trend in fundraising in the 2011 Venture View predictions survey by the National Venture Capital Association (NVCA) and Dow Jones VentureSource. 

Survey respondents included 180 CEOs of VC-supported firms and 330 VCs. 

“The improving exit market and a renewed excitement in the IT sector have engendered a confidence among VCs and the CEOs of the companies in which we invest that promises to propel the start-up community forward in 2011,” said Mark Heesen, president of the NVCA in a press release. 

“While the venture industry will continue to evolve, and likely contract, the companies we fund will continue to grow, innovate and drive the U.S. economy,” he surmised. 

“An anticipated rise in venture investment and improvement in the national economy are closely linked,” said Jessica Canning, global research director of Dow Jones VentureSource.

“Venture investment is meant to be spent – on employees, technology, office space and other expenses – which means it reverberates throughout the economy,” Ms. Canning added. “Raising capital also gives companies an opportunity to grow, adding to their headcount and spending power as they try to become the next Google or Apple.”

VC opinions on investments: 

• 51 percent anticipate an increase
• 24 percent don’t forecast improvement
• 24 percent expect a decrease
• 51 percent anticipate increases in later-stage investment
• 49 percent forecast expansion and seed investment
• 46 percent expect early-stage investment
• Among the VCs who invest in the earlier stages, 30 percent plan to co-invest more with angels

CEO opinions on VC investment:

•  58 percent forecast increases in VC investments
• 64 percent hope to get new funding

VC expectations on increases in technology:

•  82 percent predict investments in consumer, Internet and digital media
• 80 percent forecast an increase  in cloud computing
• 66 percent expect more in mobile/telecom

VCs also make predictions about “froth”. (That’s a term used regarding over-investment.) Sixty-nine expect froth in consumer Internet and digital media, and 47 percent predict froth in cloud computing.

Fifty-three percent of VCs will invest only in the U.S.

Otherwise, VCs will not ignore startups in Asia:

• 26 percent are considering startups in China
• 18 percent are look favorably at opportunities in India

While VCs disagree on the direction of fundraising, there is a consensus on limited partnerships (LP):

• 76 percent anticipate LPs to get favorable consideration
• 48  percent say foreign LPs will get more funds

The economy will improve according to 63 percent of VCs and 64 percent of CEOs.

See the survey-results slide presentation.

From the Coach’s Corner, if you’re looking for funding, here’s a column you’ll want to read featuring the expert opinion of premier strategist Joey Tamer: What No One Tells You about Raising Investment Capital.