Outlook & Trends in Venture Capital Investing

Happy New Year to all the readers of this blog. Many apologies for the delay in posting.

One of the topics set out for this blog at inception is to cover the ins and outs of what it means to be a startup, including the financing activities that come along with such a pursuit. As a result, monitoring trends in the venture capital industry is very poignant.

From Soup to Nuts - Time to IPO

According to a Business Week interview with the President of National Venture Capital Association, the median time between investment and IPO for many investments has grown significantly over the last ten years, and now stands at nearly 8 years in the first three quarters of the year vs. 4 years in 1999.

Further the return potential for exits is somewhat more difficult than in the past with just 27/128, or just over 20% of issues resulting in 10x returns for 2007, according to the NVCA and Thomson Financial. The number of IPO's did strengthen for 2007 over 2006, though with Information technology accounting for 17/31 IPO's in Q4 2007 and 50% of the venture-backed offering size at $1.5 billion.

Looking Forward to 2008

The National Venture Capital Association also recently just released its 2008 Survey of more than 170 professionals and their predictions for the industry next year. The mean prediction for funds in 2008 is in the $20 billion range, according to the survey.




The respondents believe that the Internet remains high among the list of venture investments for 2008, although Clean technology tops the charts.



New Math to VC Investing

Is it possible that even a flat dollar amount might result in more venture backed projects in 2008? A recent Wall Street Journal article points to Peter Thiel's recent success with a 50X return to date on his $500,000 investment in Facebook. Thiel's Founder's Fund and a few other firms like it out in the valley are focusing mainly on investing among their own network of entrepreneurs and companies, and seeking to deploy less capital with each investment as the costs of starting companies is coming down. Charles River Ventures has launched a similar program, though the iconoclastic approach raising the skepticism if not the ire of traditional venture investors. This year is certainly not likely to be dull!