US-based venture capital (VC) firmssaid they would invest more and chief executives (CEOs) of portfo-lio companies are also increasingly confident about the year, according to the 2011 Venture View survey, conducted by the NVCA and data provider Dow Jones VentureSource.
The annual Venture View surveyed more than 330 VCs in the US and 180 CEOs of US-based venture-backed companies in late November and early December.
Mark Heesen, president of the NVCA (pictured), said: "At this time last year, the venture capital industry was optimistic, but cautiously so. While the industry will continue to evolve, and likely contract, the companies we fund will continue to grow, innovate and drive the US economy."
More than half (51%) of US-based VCs expected their investment activity to pick up this year while 24% said it would remain the same. CEOs were even more hopeful – 58% predicted an increase in venture investing and 64% planned to raise a financing round this year.
However, the financing round is not expected to be through a flotation. Just 4% of CEOs said they expected to start an initial public offering (IPO) this year.
However, the public stock markets are regarded as an important exit route – 37% of CEOs said they were considering selling to an already-listed company, while more than half said there would be greater numbers of secondaries sales.
Technology companies are expected to fare best in the exit market, according to a majority of VCs, with predicted increases in both volume and quality in IPOs and acquisitions.
Fundraising was cautious, split about evenly between "increase, decrease or hold steady", while three-quarters said the investors – limited partners (LPs) – would gain favourable terms.
But the US reputation means nearly half of VCs expected more foreign LPs to commit to their funds. While 53% of VCs have no plans to invest in start-ups outside the US this year, those that do viewed Asia as the prime target.
Of the VCs planning to invest outside the US, 26% were looking at China and 18% were inter-ested in India, with western Europe at 19% and Latin America at 11%.
Europe-based VCs were also cautious about their region. According to Belgium-based trade body the European Private Equity and Venture Capital Associa-tion, 41% of VC respondents to its survey expected an increase in the investment level, and 26% predicted a decrease, although just a fifth said fundraising conditions would improve.
For a sustained recovery in investments, most respondents consider that a stable and strong growth in European Union (EU) gross domestic product (GDP), together with a better exit outlook is needed. Last year, the aggregate GDP of the 27 members of the EU grew by 1.8%, after a 4.2% decrease in 2009, and is expected to hit 1.7% this year.
In Asia, accountancy firm Deloitte’s survey of 245 CEOs at Asia-Pacifics fastest-growing technology com-panies found 54% predicted strong growth for the year, while 43% expected weak or negative growth.
But venture and public funding for businesses was expected to be less important this year, Deloitte said. The survey found the main source of financingfor 2009, and expected again this year, was cashflow from operations for 89% of companies, while angel and VC funding provided 7% and 20% respectively, and IPOs 14%.