Venture capitalists foresee back-to-basics investing in 2013 with money flowing to information technology startups in the enterprise and healthcare markets and away from cleantech and traditional medical science.
These same investors are relatively sanguine about their fortunes, with half anticipating an improvement in venture returns and 62% expecting a boost in M&A activity. They are nonetheless reticent to predict a similar gain in IPO volume, but still 40% do in a year-end survey conducted by the National Venture Capital Association and Dow Jones VentureSource.
More than 600 venture capitalists and startup CEOs were contacted for the study in late November and early December.
Overall the participating VCs had reservations about the coming 12 months. Almost half (47%) saw venture investing in the United States declining. Only 27% expect it to increase.
They nonetheless saw areas of strong and weak interest: For instance:
- 61% of the venture investors expect more money to go to enterprise IT startups;
- 57% expect more money to go to startups in healthcare IT;
- 61% forecast less investing in cleantech, and roughly half of investors see a decline in activity in biopharma and with medical devices companies.
A consensus also seems to have taken hold on which deals will face the greatest hurdles. Forty-five percent of investors said Series As will be the toughest birds to bag in 2013, followed by Series B, which 28% said would be the hardest to close.
Still, half see better returns, while 34% see little change and 16% fear a decline. Fueling this is what many expect will be an increase in M&A activity, particularly in the technology sector, but also in life sciences. Compared with the 62% who expect more M&A, only 29% anticipate increases in IPOs.
Fundraising is a point of general concern. Roughly 86% expect fewer funds to raise money in 2013, though they are split over whether the dollars flowing into venture will decline or increase.
When it comes to looking abroad, Latin America is the region most expected to see greater investment by U.S. firms, followed by China and India. Western and Eastern Europe are expected to see less investment.
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