No big surprises here, as the National Venture Capital Association (NVCA) predicts a difficult year for venture capital in 2009. Difficult means slowdown in investments and few exits. The majority expect recovery in 2010, so that’s a spot of good news. And for my part, I love the use of “Darwinian Change” in the following quote; it’s a brilliant euphemism. This is from the press release:
“2009 will be a year of anticipation for the venture capital industry as the economic turmoil will engender a fair amount of Darwinian change,” said NVCA President Mark Heesen. “The recession and shuttered IPO market will place tremendous pressure on portfolio companies to tighten their belts and re-tool where necessary. We will likely see a marked slowdown of new investments as venture capitalists turn their attention to supporting these existing companies. That said, most venture capitalists will say that a down market is the best time to invest when valuations and competition are lower. There is no recession on innovation and great ideas will still get funded – especially in sectors that have more insulated demand such as clean technology and life sciences.”
This is based on an NVCA survey taken from late November to middle December, including 400 venture capitalists. More than 90 percent predict a slowdown in investments. More than 95 percent say it will be harder for startups to get funded. And 96 percent say it will be harder for VCs to get funds to invest. Almost three quarters say they don’t expect new public stock offerings, meaning it will be harder to find profitable exists to earlier investments.
Not much good news here, but there is clean technology and life sciences that Mark Heesen mentions above, and this summary, which sounds like at least we can look forward to 2010:
“Most venture capitalists are predicting a very difficult 2009 but anticipating a much improved 2010,” concluded Heesen. “Those firms and companies that can weather this storm – and there will be those that do not — will emerge strongly. Venture capital backed companies represent a critical engine of economic recovery for this country. It is in everyone’s best interest that theses companies continue to prosper, creating jobs and bringing innovation to market.”