VCs Expect More Deals in 2011, but Not for Science

(Investor.gov)

A survey of U.S. venture capital (VC) investors shows expectations of more investments for entrepreneurs in 2011 across all company stages from initial seed funding to later stage rounds. More VCs expect investments to increase in technology-related companies, however, rather than those based on scientific discoveries. The survey of 330 VC investors was conducted in late November and early December 2010 by National Venture Capital Association (NVCA) and Dow Jones VentureSource.

About half (51%) of VCs surveyed expect to increase their investments in 2011, compared to about a quarter (24%) each anticipating about the same or a lower volume. VCs expect to add funding about evenly across all stages of company development, in seed (49%), early-stage (46%), expansion (49%), and late-stage (51%) rounds. Nearly half (44%) expect investments in new rather than existing companies to increase in 2011.

VC investors however expect more of funding in 2011 for technology rather than science-based companies. Roughly eight in 10 VCs expect to see increasing investments consumer Internet and digital media (82%), software/cloud computing (80%), and health care IT (77%). Another half to two-thirds of investors expect investments to increase in mobile telecommunications (66%) and software-as-a-service (51%).

For businesses based on scientific discoveries, the outlook is much less clear.  About one-third of VC investors expect there will be more investments in biopharmaceutical and medical device companies in 2011, but another one-third anticipate the same level of investment, and still another third expect to see less funding for these companies. About four in 10 (38%) VCs each expect there will be more investment in energy companies in 2011 with about the same number  (40%) anticipating less investment, and only 22 percent expecting levels to stay the same.

NVCA and VentureSource also surveyed 180 CEOs of venture-backed companies, who generally expressed optimism as well for 2011. Nearly six in 10 CEOs (58%) expect venture investing to increase in 2011. Somewhat more CEOs (64%) plan to raise additional capital next year for their companies.

Venture-based enterprises expect to increase hiring and upgrade their technology next year. Some eight in 10 (82%) CEOs anticipate adding staff in 2011. Also, about two-thirds (66%) of CEOs expect to increase their technology spending in 2011. About half of CEOs (53%) anticipate making more use of social media next year.

*     *     *