Family Learning Center

Posts Tagged ‘Venture Capital Association’

Ten-Year Venture Capital Returns Continue To Slide

Ten-year returns for Venture Capital firms continue to slide downwards for the 5 and 10-year periods ending on September 30, 2009 according to the Cambridge Associates U.S. Venture Capital Index, the VC performance benchmark of the National Venture Capital Association.

As investments in startups during the lucrative 1990’s tech boom are no longer included, ten-year returns slide to lower and lower levels, dropping by nearly half from the previous quarter. The 10-year return fell to 8.4 percent from 14.3 percent in the previous quarter and from 40.2 percent one year earlier. The 5-year returns also declined to 4.9 percent from 5.7 percent in the previous quarter and from 10.7 percent one year ago.

While returns are diminishing, investments continue to rise after a year when venture funding was in the doldrums. VC investments in fourth quarter of 2009 rose to nearly $15 billion, up 113 percent from a year ago.

These numbers aren’t surprising, considering the drought in IPOs over the past few years.But venture capitalists and tech entrepreneurs are hopeful that 2010 will be the year they rain down on the Valley once gain, with a handful of promising startups that could be ready to go public this year. In fact, Tesla just filed for a $100 million IPO on Friday.

Read the whole story…

New Year’s Resolution? VCs Could Spend More In 2010

The first quarter of 2010 could see a higher number of investments by venture capital firms than the fourth quarter of 2009, according to figures from new reports by the National Venture Capital Association and information and data services company ChubbyBrain.

Data from a report relased by the NVCA yesterday shows that the fourth quarter of 2009 saw a growth of $1.7 billion in venture funds over the previous quarter, similar to numbers seen from Q4 2008 to Q1 2009. Data released today by ChubbyBrain shows that following the earlier growth in venture funds, Q2 2009 saw a $1.4 billion increase in VC investments, a trend that could mean big bucks for startups in the first quarter of 2010.

Sponsor

As we reported last week, 2009 was a difficult year for startups and venture capital firms, with venture-backed mergers and acquisitions continuing a downward trend in 2009. Carolynn Duncan, founder and director of the startup incubator Portland Ten, says that the “pressure crunch” of 2009 caused VCs to give prospective startups more than the third degree.

“It was more like the fifth degree,” Duncan told ReadWriteWeb. “It was so intense, even for the companies showing great traction and that had bootstrapped the hell out of their project.”

Duncan believes that as the new year kicks off VCs that raised funds at the end of 2009 will be looking at a new class of startups to invest in. When asked if 2010 would be an easier year to find funding, Duncan was hesitant, but optimistic.

“I don’t think ‘easier’ is the right word, maybe just not as demanding,” she said. “People are just glad its 2010 and not 2009 anymore.”

Photo by Flickr user borman818.

Discuss

Read the whole story…

It Was a Turbulent Couple of Years But Startups in Q4 ‘09 Prospered

While 2009 continued a downward trend as one of the worst recessions in U.S. history, the decline for venture-backed mergers and acquisitions has not been as severe as the dot-com bust in 2001 and 2002.

New figures from the National Venture Capital Association show that in the last quarter of 2009, M&A hit $7.8 billion, up from the previous year’s mark of just over $2 billion. Overall, 2009’s total of $12.6 billion could not match 2008’s $13.6 billion total.

Sponsor

Mergers and acquisitions totaled over $68 billion in 2000, only to fall below $8 billion by 2002 following the bursting of the dot-com bubble. In contrast, 2007’s M&A total of $29 billion has declined to just over $12 billion in 2009 – a much more smooth rate of decay which has begun to flatten out.

Mark Heesen, president of the NVCA, says they expect to see continued improvement throughout 2010. “Clearly, we have a long way to go towards a full recovery but we are encouraged by the increasing acquisition values and the number of companies that have filed a registration with the SEC to go public,” he says.

A late boost in the fourth quarter of 2009 has helped startups from reliving the experiences from earlier in the decade, the largest of which came from Amazon’s July purchase of Internet shoe seller Zappos for $930 million. This acquisition helped internet specific purchases climb to $2.2 billion in Q4 2009 – a near seven-fold increase from 2008’s final quarter.

Discuss

Read the whole story…

VC will ride out of the downturn on health care, fintech and online ads

The first quarter of 2009 saw venture capital investments hit a 12-year low, according to a report from PricewaterhouseCoopwers and the National Venture Capital Association (NVCA). While investors are still wary about making new investments as the economy slowly begins to correct itself, venture capital will no doubt reemerge as the preeminent source of financing in the technology and life science industries.

Ultimately, a shift in the way consumers use the internet will serve as the major catalyst for increase venture capital interest in certain technology sectors. With the advent and growth of collaboration tools on the web, new technologies geared toward project management among companies and groups will become better developed for both enterprises and average consumers.

There are three main sectors in technology that will become hot spots for venture capital funding moving forward: Health care information technology, financial software and online advertising.

Health care IT will continue to gain speed, especially if president Obama passes his health care reform package. With new government regulations on the horizon, opportunity for compliance systems will grow exponentially. New processes that have long been completed manually will be automated, and the prospect of using shared platforms for record keeping and other data exchange will only increase companies’ appeal to investors.

Firms seeking opportunities in health care will be diligent about the details. Today, the focus is on treating chronic diseases. Moving forward, we’ll see a sea change from drugs and devices used to treat diseases and their symptoms to preventative care and awareness campaigns. As such, investors will likely be targeting diagnostics, specialty pharmaceuticals, regenerative medicine and preventative devices. The companies that do the most to prevent diseases and reduce health care costs accordingly will come out the winners in the venture capital game.

Improved collaboration will also cast the spotlight on financial technology, or fintech. Enhanced information sharing tolls can be used to create best practices that will, in turn, reduce costs, improve efficiencies and bolster the whole financial services sector.

Finally, online advertising will see a surge in venture dollars due to increased internet-based sharing. We’ve already seen advertising shift dramatically to new media in the last few years. And with this new emphasis on collaboration, companies will be able to more easily see others’ successes and mirror their efforts. Measuring successful ad returns quickly and accurately will also drum up investor interest in a big way.

In all three of these sectors, investors will be giving preference to companies that have more cost effective ways of getting products to market. From now on, comparative effectiveness research (CER) will require companies to demonstrate how efficient they are at this, and based on these results, set prices for reimbursements. For example, those that can reduce the current overwhelming costs of health care, or who can produce the same (or better results) at a lower cost will hit the sweet spot for most venture firms.

In addition, both technology and life sciences will be impacted by strategic themes that will eventually drive growth and attract VC financing. For instance, many technology platforms are migrating to newer technologies with changing cost structures at the same time that many medical treatments are moving from generalized to personalized medicine.

Also, many existing technologies are reaching the end of their lives or patent protections. As a result, many businesses based on once-novel innovations are now facing consolidation and other competitive pressures. Most important is convergence; information technology will increasingly merge with life sciences. Right now, diagnostic test makers are partnering with therapeutics providers to increase efficacy and safety.

The economy isn’t going to repair itself — nor is the government going to be able to fully turn it around. But, when the time is right, new, smart enterprises will begin to flourish, and venture capitalists will be ready to lend the most promising and viable among them enough financing to get them through the remainder of the slump.

James A. Datin is executive vice president and managing director, life sciences group of Safeguard Scientifics. Kevin L. Kemmerer is executive vice president and managing director, technology group of Safeguard Scientifics.

Read the whole story…

Beachfront Launch: Hawaii’s Startup Community

In 2006, in an essay entitled How to Be Silicon Valley, Y-Combinator’s Paul Graham laid out what it would take to build the next generation of emerging startup hubs. According to Graham, all that is required are nerds, rich people, personality and a willingness to tolerate odd (but brilliant) ideas. Hawaii probably isn’t the first place you’d think to launch a startup but given the fantastic quality of life and key components of a good tech community, it’s certainly a viable option.

Sponsor

Nerds: Hawaii already hosts its fair share of nerds. Employees from companies like identity management platform Chi.mp, iLovePhotos creator Blue Lava Technologies and social media marketing solution Sprout enjoy the islands as home. Meanwhile, technology groups like TechHui, the Hawaii Science and Technology Council and Social Media Club Hawaii host regular events for entrepreneurs to network and provide feedback to budding technologists.

Investors: The Hawaii Venture Capital Association and High Technology Development Corporation (HTDC) offer opportunities for investment and business development. HTDC in particular helps entrepreneurs in Maui and Oahu obtain facilities, equipment, and in some cases, funding.

Says CEO Yuka Nagashima, “In addition to workshops and education, we’re offering below market rent and flexible lease terms. We understand startup companies and are helping them size up and down to meet their needs. ” Program participants include Sprout, neighborhood platform People Bridge and crowdsourced movie production site Produced By You.

Tolerance for New Ideas: Says Chi.mp’s Honolulu-based Chief Operating Officer Mike Curtis, “While the tech scene is relatively small, it is a vibrant, welcoming community and easy to plug into if you are a newcomer to the island. The local entrepreneurial community reflects [the spirit of Aloha] by sharing openly with one another to the betterment of the industry.”

Curtis notes that in addition to a close-knit tech community, one of the advantages of launching your business in the state of Hawaii is that tax credits are generous compared to those offered in other states. If you’re interested in exploring Hawaii as a place to launch or relocate your business visit Enterprise Honolulu for a list of startup-related tax incentives.

Photo Credit: Jeff Kubina

Discuss

Read the whole story…

MoneyTree report: Venture capital still rebounding

Contrary to what you may have heard elsewhere, venture capital investment is still growing, at least according to the latest MoneyTree report from PricewaterhouseCoopers and the National Venture Capital Association.

Yes, that’s pretty much the exact opposite of what Dow Jones VentureSource concluded last week — that a potential VC rebound had stalled. It looks like the disagreement has less to do with the Q3 numbers, where MoneyTree shows a total of $4.8 billion in venture capital investment, compared to $5.1 billion shown by VentureSource, and more with Q2, where there was a much bigger gap in the numbers (MoneyTree: $4.1 billion, VentureSource: $5.4 billion).

Tracy Lefteroff, global managing partner of venture capital at PricewaterhouseCoopers, said the difference boils down to varying methodologies. VentureSource includes debt financing while the MoneyTree report doesn’t, he said, so MoneyTree is a better indicator of “permanent investment.” Let’s hope that’s true, since MoneyTree shows a nice, steady increase in VC investment since last year’s financial crash, when venture capital plummeted along with everything else.

But even if we look at things optimistically and believe the numbers will continue going up, that doesn’t necessarily mean things will eventually return to the high investment levels of the last few years.

“We’ve returned to more of a historical norm for venture capital, one that’s not only sustainable, but will go up for here,” Lefteroff said.

In terms of industry, cleantech saw the serious growth, with an increase of 89 percent of Q2, to $898 million invested in 57 deals. Software, meanwhile, dropped 9 percent to $622 million invested in 122 deals. This may reflect some permanent changes in the software industry, Lefteroff said, as startup work shifts from big, ambitious platforms to smaller applications.

Read the whole story…

Only 17 venture capital firms raise money in Q3 — fewest in 15 years

Venture capitalists are a breed in decline.

Just 17 venture capital firms raised new funds in the third quarter of 2009, the smallest number of number of firms in any quarter since the third quarter of 1994, according to new data released by Thomson Reuters and the National Venture Capital Association (NVCA).

While venture capital firms typically raise money every three or four years, and so a single quarter represents only a snapshot, the historically speaking very low number of firms raising money shows just how much of a crunch the industry is in right now.

We’ve talked about the reasons before: Venture firms saw their heyday in the late 1990s when international investors rush to give them money, lured by the impressive profits produced by the Internet boom (including the IPOs of companies from Cisco to eBay). But the surge of new VC entrants meant more competition, which lowered the overall profits, and we’re seeing the fallout now.

Only $1.6 billion was raised by the 17 firms in the third quarter, which is the lowest level of dollars committed since the first quarter of 2003 when $938 million was raised.

However, this may represent the bottom. “Anecdotally we are hearing that fundraising activity is accelerating as more firms that were waiting for economic recovery are beginning to formally seek commitments,” said Mark Heesen, president of the NVCA. “The reality, however, is that many limited partners are still determining their long term strategies in wake of the past year’s financial crisis and that slows the process down considerably. We expect commitment levels to remain modest for the remainder of 2009 with gradual increases beginning in 2010.”

Read the whole story…

Venture Exits Still Anemic In Third Quarter, Down Nearly 50 Percent (Charts)

Despite a couple large IPOs (LogMein and A123Systems) and a steady but tempered flow of mergers and acquisitions, financial exits for venture-backed companies remained anemic in the third quarter of 2009. Data released by both Dow Jones VentureSource and the National Venture Capital Association/Thomson Reuters show declines in both M&A and IPO dollars. VentureSource counts $2.9 billion in combined M&A exits in the third quarter, 49 percent lower than a year ago. The NCVA tallies up a $1.8 billion total, which is down 46 percent.

The two organizations have different sets of data, but they show similar trends. For example, VentureSource counts only the two IPOs mentioned above, whereas the NCVA also counts Cumberland Pharmaceuticals. That’s down from five venture backed IPOs in the second quarter.

IPOs Down

The IPO for battery-maker A123Systems last week was particularly strong, raising $380 million. LogMein’s IPO at the very beginning of the quarter raised $107 million, and Cumberland’s brought in $85 million, for a total of $572 million. That amount is down from the $720 million venture-backed IPOs brought in last quarter, but is up from the $188 million a year ago. Compared to year’s past, though, the IPO window is still fairly shut.

The M&A picture wasn’t much brighter in the quarter. VentureSource tracked 71 deals worth $2.3 billion, down from $5.2 billion last year and $2.8 billion in the second quarter of this year. Some of the larger deals during the quarter were VMWare buying SpringSource for $362 million and Intuit buying Mint for $170 million. (Remember, these are only venture-backed exits. Deals for publicly traded companies like Adobe buying Omniture for $1.8 billion, Dell buying Perot Systems for $3.9 billion, or Xerox buying Affiliated Computer Services for $5.75 billion are not counted in these numbers).

The NCVA’s data shows 62 M&A deals in the quarter (down from 88 a year ago), with disclosed values of $1.2 billion (down from $3.1 billion a year ago). And the returns aren’t looking so great either. VentureSource says the median acquisition price in the third quarter was $21 million, compared to a median amount of $17 million in equity funding raised prior to the acquisition.

The NCVA similarly shows a decline in average deal size from $96 million a year ago, to $58 million. And the number of deals worth less than the money put into them is more than the number of deals that made money, which is normal.

Average M&A Deal Size Drops

Crunch Network: CrunchBoard because it’s time for you to find a new Job2.0

Read the whole story…