Venture Capital Outlook 2013 (Part 2 of 3: CEO and VC Predictions for 2013)

Are you a business owner looking for investment dollars in 2013 to help you grow your business? Or an investor trying to decide whether and where to invest your money this year? If you answered “yes” to either question, then you’re undoubtedly asking yourself one big question:  WILL 2013 BE A GOOD YEAR TO FIND OR INVEST MONEY?

Of course, nobody knows for sure, but what better place to look than a recent survey of CEOs and venture capitalists taken jointly by NVCA and Cambridge Associates?  You can see the survey here.

Predictions for 2013 from CEOs and VCs.

Here are some of the key predictions for 2013 that came out of the NVCA/Cambridge Associates survey referenced above:

1.  More Fundraising Under Tougher Conditions 

Sixty seven percent of venture-backed companies plan to raise additional funding in 2013, but a full 42% of those companies’ CEOs think it will be more difficult to do so this year than in 2012.  To sharpen that point on the fund side, 44% of VCs expect the fundraising market to contract in 2013, with fewer dollars raised and a smaller number of new funds (versus just 9% of VCs who anticipate an expansion of the fundraising market).  Another 42% of VCs expect continued concentration of the VC industry, with more dollars raised by fewer VC funds.

2.  Funding Terms Favoring Investors 

A clear majority of VCs (65%) and CEOs (56%) predict that funding terms will favor VC investors over the companies raising the investments.

3.  Elusive Series A Funding 

Forty five percent of VC investors think the most difficult funding to obtain in 2013 will be the seemingly elusive Series A funding.

4.  Companies Most Likely to be Funded 

The companies considered to be in the best position to raise funds or even go public through an IPO are those in the business and health care information technology sectors, followed by consumer information technology.  By contrast, the companies in the weakest position to take those steps include some of the stars from recent years: clean technology, medical device, and biopharmaceutical companies.

5.  More Sales; Few IPOs 

About 50% of CEOs from venture-backed companies said they’d be interested in selling their companies in 2013.  And 62% of both VCs and CEOs predict an uptick in acquisitions in 2013.  When it comes to IPOs, though, the predictions are not quite as rosy: only 40% of VCs and 29% of CEOs believe IPO volume will increase in 2013.  The upshot: the preferred route for most to an exit an 2013 will be a sale transaction rather than an IPO.

6.  Government Wild Card 

The prospects for strong growth by companies and the funds that invest in them are perhaps more subject than ever to the decisions and actions of our federal government.  According to NVCA president Mark Heesen, “The potential for growth is palpable, with positive forecasts for startup jobs, technology innovation, and global activity.  But to realize this promise we must get on the right track in Washington, and quickly.”

Lookout for my next blogpost, where I’ll venture (pardon the pun) some predictions (also known in the industry as “WAGs”) for 2013!