News, Trends, Wall Street
Over 50% of Venture Capital Execs Consider the Industry to Be “Broken”
July 10, 2009 by David Feldman · Leave a Comment
Polachi, today issued the results of an online survey which polled over 100 venture capital executives—70% of which were Partners or Managing Partners. Seeming to support recent reports that the VC industry needs to be right-sized, more than half (52.9%) of the executives indicated their industry was currently “broken.”
The survey also found that despite increasing indicators from the Fed that the recession is lifting, nearly two-thirds (59.9%) of the respondents revealed they are less confident about the state of the VC industry today than they were six months ago.
“These survey results validate a cautious sentiment we have been observing for some time now in the VC industry,” said Charley Polachi, Partner at Polachi. “While we certainly acknowledge that somewhat of a reset is needed, we also believe venture firms play a critical role in the development of new technologies and start-ups, which are vital to the economy for growth.”
When asked to identify which functional trends they were most concerned about, nearly all (92.7%) of the executives indicated they were either “worried” or “most worried” about the uncertain return of exit markets. Also found to be of concern was syndicate risk, with 69% of the respondents expressing some degree of worry over the “ability of syndicates to hold together.”
“Reduced funding from investors and depressed exit prices are changing venture capital,” said Paul Margolis, Partner at Longworth Venture Partners. “As long as these trends continue, VCs will need to be more efficient with capital and find ways to get acceptable returns at lower exit prices.”
When asked about the hottest growth areas in the VC industry, Cleantech/Energy received the highest response (62.8%) followed by Consumer Internet/Web 2.0 (44.2%) and Internet Marketing (40.1%).
The survey also found executives to be split down the middle when it comes to which geographical region currently represents the area of hottest investment opportunities; 40.7% indicated the east coast and 43.7% indicated the west coast/Silicon Valley.
