Most respondents also revealed what they hope will occur again (repeat) and what they hope to miss (avoid) in 2012 compared with 2011.
Macro-political and economic
Erik Sebusch, partner of venture capital firm CMEA Capital, said: "European Union (EU) and Middle East stability will be the big issue."
Repeat: More venture capital-backed IPOs (initial public offerings.
Avoid: High pre-money valuations.
Peter Dunphy, treasurer at tyre maker Michelin, which chose not to initiate a corporate venturing programme, said the issue would be "survival or not of the EU experiment. A large market in chaos is never helpful to innovation".
Repeat: Despite turmoil, the IPO market was somewhat positive. I hope this continues.
Avoid: Continued political turmoil – the bond markets will have their day should governments fail to act.
Mark Heesen, president of US trade body National Venture Capital Association (NVCA), said the big issue was: "The overall global economy: how the US deals with its budget, how the EU deals with faltering EU members and how China will react to both. All of this will affect exits – IPOs and M&A (merger and acquisition) activity."
Repeat: Saner valuations and increasingly better entrepreneurs.
Avoid: Washington DC gridlock (wishful thinking,) which we all now see as directly impacting venture returns.
The head of an industrial corporate venturing unit said: "In the US, the big issue is independent VCs (venture capital firms) concentrate on later-stage deals, in the EU the opposite – which leads to funding gaps and lack of syndicate partners in the underfunded stages."
Repeat: Continued focus of corporations on VC investing.
Paul Morris, director of US-based Dow Chemical’s VC activities in Europe and Israel, said the three big concerns were "resolution of the debt crisis, risk of recession and a huge amount of uncertainty".
Repeat: The growth, proliferation and growing acceptance of the vital role corporate venturing has to play in the VC industry.
Avoid: As corporations are affected by the economic and financial situation they do not start to kill their corporate venturing units as has happened in previous downturns.
Marcos Battisti, managing director of western Europe and Israel at Intel Capital, said: "The big issue is the economy. There is also a positive trend in perceptual computing."
Repeat: Level of innovation, but at lower valuations as they were unrealistically high in 2011.
Avoid: High valuations, and the ineffectiveness of lobbying organisations in Europe – the European Private Equity and Venture Capital Association represents only the buyout firms and pays lip service to VCs and it is the same with the British Private Equity and Venture Capital Association I wish they were as effective as the NVCA in the US.
Cédric Latessa, investment manager at Aster Capital, which manages the corporate venturing investments of French companies Schneider Electric, Alstom and Rhodia, said the concerns were "government debts and the euro".
Repeat: The good first half in terms of M&A activity and mostly reasonable valuations.
Avoid: The second half of 2011.
Shin Nagakura, executive managing director of Japanbased outsourcing provider Transcosmos (Silicon Valley office), said: "Europe will be the big issue. The good news, though, is that we can buy relevant companies cheap in the EU."
Repeat: Internet IPO windows.
Avoid: European monetary issues.
Peter Christy, a principal at consultancy firm Internet Research Group, said: "My largest gnawing concern about the next few years is wealth disparity, both on the personal level, as highlighted by the Occupy Wall Street movement here in the US, and on a national level, as evidenced by the eurozone turmoil. We could be in the ‘take them to the Bastille’ range [of feeling among the majority of people], and I do not think societies recognise many impending revolutions until they are in the middle of them."
Mary Kay James, managing director at DuPont Ventures, the venturing unit of the US industrials group, cited "resolution of the European debt crisis" as the major concern.
Repeat: Continued increase in clean-tech investment.
Avoid: High-visibility bankruptcy – like Solyndra.
Roger Pomerantz, who is taking over the new $250m Merck Research Ventures Fund, Reid Leonard, managing director of the fund, and Greg Wiederrecht, head of the external scientific affairs department at Merck Research Laboratories, said the big issue was "managing the productivity of portfolio company programmes uncertainty".
Repeat: Increasingly creative cooperation between independent VCs and pharmaceutical companies to fund companies with pipeline-enabling programmes.
Avoid: Announcement of life science funds failing to meet fundraising goals.
Andrew Gaule, founder of innovation forum Corven Networks, said: "The crisis in the eurozone with a country dropping out of the euro and/or bank collapse."
Repeat: Corporations will see the continued importance of innovating outside the core business and seeing the advantage of entrepreneurial start ups which can be invested in and supported.
Erik Rutten, senior investment manager at DSM Venturing, the venturing unit of Netherlands-based industrial group Royal DSM, said he hoped this year would "create trust in venture capital again" .
Avoid: Big devaluation of IPOs on stock markets, which creates a low appetite for new IPOs.
Jörg Sievert, a managing member of SAP Ventures, the venturing unit of the Germany-based software group that raised a $350m fund last year, said the big issue would be financial stability, but specifically within venture capital "too many funds overpaying". He added: "There is a severe disconnect between overheated and overvalued private companies compared with public companies."
Repeat: The resilience of enterprises in the US and Europe.
Avoid: Another state bankruptcy or another bubble like 2000.
Brad McManus, director of investments at Panasonic Ventures, the corporate venturing unit of the Japan-based electronics maker, said: "First, resolution of the sovereign debt and international banking crisis. Second, the 2012 US election, which is all about the role of government, socialism, economy and debt. This is important not only for the future of all countries, geopolitically and economically, but also for corporate venturing because the stock market will respond favourably, leading to a better IPO environment and more venturing activity. Third, potential for war in the Middle East."
Repeat: Realisation that socialism has failed and that countries need to live within their means.
Avoid: Kicking the can [of extending debt before it needs to repaid] down the road by politicians worldwide in terms of addressing real issues, especially in Europe and the US.
Reese Schroeder, managing director of Motorola Solutions Venture Capital, one half of the phone maker’s corporate venturing unit that divided in January, cited "the economy and the US presidential election".
Repeat: Increased importance of corporate venturing in the ecosystem.
Avoid: The economy’s troubles.
A China-based head of corporate venturing said: "US elections creating a negative Sino-American environment."
Repeat: Desire of companies for strategic value over financial considerations.
Avoid: Egregious intervention by US regulatory oversight body the Committee on Foreign Investment in the United States (for example in 3Com’s planned sale of 3Leaf), and a deterioration of Sino-American relations.
Stefan Gabriel, president of 3M New Ventures, the venturing unit of the US-based industrials group, said the concerns involved "escalation of the public debt crisis, fears of the next global recession and Repeat: Great 3M top management support for corporate venturing and more companies to follow this trend.
Roel Bulthuis, head of Merck Serono Ventures, the corporate venturing unit of Germany-based pharmaceuticals firm Merck, said growing issues included "further outflows of LP [limited partner – investors in venture capital funds] money from the biotech sector, and an increasing number of VC funds going out of business".
Repeat: Boards and chief executives more focused on strategic deals, more realistic about structure and the need to prepare early, which could lead to increased commitments from pharmaceutical groups to corporate venturing funds, including mid-sized pharma and large biotech entering the venture space with their own funds.
Avoid: Traditional VCs going out of business.
Campbell Murray, a managing director of the Novartis Venture Funds, the corporate venturing unit of the Switzerland- based drug maker, said: "Continuing fallout from the balance sheet recession and the political response to the realities of unfunded, and unfundable, future liabilities. Specific to life science venture capital, FDA (US Food and Drug Administration) regulatory risk is the biggest danger to the continued persistence of a vibrant VC ecosystem in life sciences in the US."
Repeat: Work from all political spectrums to end the deficits run up in Western nations’ public finances.
Avoid: Political grandstanding at the expense of fundamental reform. The US tax code needs to be ripped up and a simple, no-deduction code that applies to everyone instituted.
The head of a healthcare corporate venturing unit said the big issue would be the outcome from numerous bridges taken out by portfolio companies in the past 18 months in the hope it will tide them over to a full funding round. "How many of them will become piers [fail to lead to a funding round]?"
Repeat: Availability of fundamentally valid deals for investment.
Avoid: Lack of liquidity, poorly functioning FDA.
Ignaas Caryn, innovation and venturing manager at European flight operator Air France-KLM, said the issue would be "how coporate venturing can survive by helping the corporate business to survive the crisis".
Repeat: Further increase of coporate venturing activity.
Avoid: The euro crisis.
Eric Gisiger, investment director of Switzerland-based bank Credit Suisse’s SVC – AG für KMU Risikokapital corporate venturing fund for local entrepreneurs, said it would "manage existing portfolio companies and continue to invest in established Switzerland-based small and medium-sized enterprises".
Repeat: Ability to close transactions with promising investment opportunities at reasonable valuations.
Avoid: Too many unrealistic business plans and valuation expectations.
Innovation
Johan Carlsson, president of Volvo Technology Transfer, the Sweden-based truck maker’s corporate venturing unit, said: "Understanding the transformative trends when connected society meets traditional industry."
Repeat: A few nice exits.
Avoid: Not making new investments.
Mark Read, head of strategy at UK-based advertising agency WPP, said: "The need for corporate innovation is, if anything, even greater in 2012 due to the continued impact of technology. We would expect even more focus on corporate venturing, particularly in sectors impacted by mobile and other new consumer technologies."
Daisuke Tojima, at Japan-based electronics company NEC’s US corporate business development team, said the big issue would be the "speed of innovation in the market".
Repeat: High pace of innovation on technologies and development of application.
Avoid: Economic crisis and natural disasters.
Thorsten Peisl, vice-president of product innovation at US-based financial services provider State Street, said it would be focused on making internal improvements to the company through corporate venturing.
Repeat: We are happy with the dealflow and number of opportunities.
Avoid: Internal challenges that are natural when starting up a new coporate venturing programme.
Sector issues
Dominique Mégret, head of Swisscom Ventures, the corporate venturing unit of Switzerland’s national phone operator, said: "My big trends in 2012 are, first, the markets will be on a rollercoaster ride as social network Facebook reaches $100bn in value at its IPO and then drops, same as happened with discount coupon provider Groupon. Second, on telecom and technology, issues such as mobile offloading, near-field communication applications, including payment, access control and couponing, overthe- top television, cloud computing; and long-term evolution phone standards. Third, corporate venturing units continue growing in importance relative to the VC market, and new corporate-backed funds managed by VCs."
Michael Jeon, head of Samsung Ventures Europe, a regional affiliate of Samsung Venture Investment Corporation that independently manages the corporate venturing deals of South Korea-based conglomerate Samsung, said: "In IT, things that support big consumer trends – smart devices, social networks – will drive their back-end infrastructure and enabling technology, including wireless network – enhancement, optimisation and 4G – technologies, data storage and display technologies. Also, Amazon.com becoming a serious competitor in the consumer electronics market."
Repeat: Regard 2011 as a fairly strong year for IPOs compared with the previous few years. Would like to see this continue to strengthen.
Avoid: Contagion of sovereign debt that causes increased volatility and risk aversion.
Amy Banse, managing director and head of funds for Comcast Ventures, the US-based cable group’s corporate venturing unit that merged with peer Peacock Fund earlier this year, said: "The business of premium digital content is something that will come to the fore. Entertainment applications offer a great way to fulfil consumers’ cravings to watch curated and aggregated content easily, including TV shows and movies, on smartphones, tablets and computers. But it is impossible to innovate, monetise or scale these technologies and services without deep know-how and relationships to obtain content owner participation. These apps offer the future of digital media, but they are running up against the realities of the content ownership hierarchy. Solving this business model will be a big issue in 2012."
Repeat: I hope raising the involvement and value of women in technology, and attention paid to this focus, will increase. There is a fallacy that you need a computer science background to run a tech company. Great entrepreneurship is different from great engineering. I believe increased diversity of founding teams will increase true consumer-driven innovation, especially where businesses cater to women.
Avoid: Start-ups cannot rely on happy accidents for innovation. Instead, they need to create technologies that will make life easier, happier and more efficient. I hope there is more of a focus on real products that meet the needs of a customer base, from stay-at-home mums to enterprises.
Gian Brown, president and general counsel of SAIC Venture Capital Corporation, said: "I would be surprised if there is not a cyber breach that rattles online commercial activity. I think we are overdue."
Repeat: It seems folks are investing in start-ups more readily year over year, a trend I hope continues.
Avoid: Clean technology needs to cool off, and my sense is that this has already been occurring for a quarter or two.
William Taranto, managing director of US-based drugs maker Merck’s Global Health Innovation Fund launched this year, said: "The biggest trend I see is the gradual shift from traditional life science investing in therapeutics to service, solution and health IT (HIT). The difficulty in any exits and lack of additional funding has caused this shift. It is easier for service, solution and HIT companies to raise capital and exit and so there is a continuing decline of therapeutic life science funds."
Repeat: The openness of VC firms to look at pharma as a partner and not a competitor.
Avoid: The closing of funds due to lack of capital and fundraising ability.
Maurice Wagner, director at Debiopharm, said: "The tightening of healthcare resources in the western markets, which makes cost effectiveness more important than ever before. The prices of drugs are likely to be reduced. If the industry wants to keep generating enough money to fund research, it has to cut the research costs and make all costs preceding the marketing phase more effective. Cutting the cost prior to commercialisation is a multi-faceted task. It concerns not only the industry but also, for example, the registration authorities, which have to consider ways of reducing their costs, such as more mutual recognition of regulatory processes."
Avoid: Further deterioration of the overall environment in which the industry operates. Health authorities need to embrace the principle that health is wealth – to invest in healthcare can only create wealth.
Chris Coburn, executive director of Cleveland Clinic Innovations, US-based healthcare provider Cleveland Clinic’s corporate venturing arm, said: "HIT will continue to grow in its impact. We like to joke in our office that it feels like Y2K [fears about the millennium bug affecting computers and resulting in a swathe of technology upgrades]."
Repeat: Strong new technology-orientated leadership has come into several important med-tech companies, which will improve the corporate venturing and technology investment market.
Avoid: Declining risk appetite of several important classes of actors in the healthcare innovation and investment community. This has created real challenges for some high potential technologies, especially in therapeutics.