Corporate & Securities Law

Venture Capitalists Want to Skip 2009

By Ryan Roberts

The National Venture Capital Association (NVCA) released its annual “Predictions Survey.” The NVCA conducted the survey in the last 3 weeks and received more than 400 responses. As you might suspect, it looks like a tough year for VCs and startups alike.

I took a look at the survey and found some interesting results:

92% of VCs believe overall venture capital investment will decline in 2009, but 53% believe they will invest in the same or more amount of companies. I read that as implying that your startup may have the same chances of getting funding next in 2009, but expect the amount of funding to be less. So that’s not entirely bad news…but

96% of VCs believe it will be harder for new companies to get funded in 2009. Thus it sounds as though their 2009 investments may be slanted towards expansion and late investments.

72% of VCs believe the venture backed IPO market will return in 2010…at the earliest. As you may know the, the IPO market for venture backed companies just isn’t there. Don’t expect a return any time soon. (But you can still find an exit via acquisition)

Steve Fredrick, General Partner of Grotech Ventures released the following statement about 2009 and how the VC industry might react:

?Predicting trends for 2009 is extremely daunting but we can look to certain investment strategies that are attractive during challenging economies. For years firms have talked about writing smaller checks, but we?ve seen few venture investments under $1,000,000. This will see a huge shift. Cash efficient, early stage companies with solid business plans which require modest financing to reach viability will be compelling targets. The trick for VCs will be to manage an expanded portfolio with appropriate levels of involvement. If done well, the upside for both the start-up and investors will be tremendous.?

And I’ll leave you with an invaluable quote from NVCA President Mark Hessen:

There is no recession on innovation and great ideas will still get funded[.]?

For the PDF charts by the NVCA, click here.

For the PDF paper by the NVCA, click here.

For a PDF of more quotes from VCs regarding 2009, click here.

Full post as published by The Startup Lawyer on December 17, 2008 (boomark / email).