Venture capitalists and entrepreneurs are becoming increasingly pessimistic about the venture funding market for the coming year, with nearly three fifths of respondents warning there is likely to be a fundraising crunch for small companies.
The NVCA and Dow Jones VentureSource survey, which charted the views of more than 500 venture capital professionals (VCs) and chief executives (CEOs) of venture-backed companies in the U.S. between November 30 and December 9, 2011, showed 58% of VCs predict a tougher money raising environment next year for seed and early stage companies, with 73% predicting total fundraising commitments to remain the same or decline in 2012. The survey and related documents can be found on the NVCA website.
Additionally, optimism about the economy decreased year-on-year with 53% of CEOs and 47% of VCs expecting improvement, compared to figures of 63% and 64% respectively, last year.
The results weren’t completely bearish – 45% of CEO’s see overall investment levels increasing in 2012 while only 25% expect a decrease. This contrast to VC’s, however, where only 32% expect a rise against 36% predicting investment to fall.
Additionally, 80% of CEOs and 63% of VCs predicted an increase in the valuation of portfolio companies in the next year. Acquisitions are expected to increase, though only 48% of respondents expect overall initial public offering (IPO) volume to increase, down from 67% last year. Technology IPOs are expected to buck the trend with 63% of the opinion that volume will rise.
Information technology (IT) was also seen by VCs to be the sector most likely to see an increase in investment, with positive predictions among respondents covering the consumer (64%), healthcare (61%) and business (50%) IT areas. The biopharmaceutical and clean technology sectors were seen as areas where investment likely to decline.
The VCs and CEOs also tipped President Obama is expected to win a second term, while a vast majority back Mitt Romney to win the Republican nomination ahead of Newt Gingrich, Romney polling a 62% winning margin among VCs and 40% among CEOs.