Cautious Optimism Among VCs in 2010

The National Venture Capital Venture Capital Association said early in December of 2009 that it was “cautiously optimistic” for 2010.

“It is readily understood by the venture capital community that our industry is going to contract in size going forward,” said Mark Heesen, president of the NVCA in a December 16 statement. “That will mean fewer firms, for sure, but not necessarily fewer companies funded. There is a great deal of innovation taking place and venture capitalists who have the track record to raise funds will be well positioned to build companies. Most venture capitalists will agree that a smaller industry is a better one.”

The key thing to note here is fewer firms but not necessarily fewer companies funded. In fact that there is every indication that venture capital firms, after a lackluster 2009, are gearing up for a strong push in 2010.

In the beginning of the fourth quarter of 2009 alone there were high profile deals such as the $52 million raised by social network advertising software company RockYou Inc. and the $57 million that textbook rental service Chegg Inc. picked up.

These start ups, much like Facebook, Twitter and others are all pre-IPO firms currently operating off of venture capital.

According to the National Venture Capital Association, most VCs predict a mild improvement in the number of venture-backed IPOs in 2010, which will provide exits for the VC firms and an entrance for you.

In the third quarter of 2009,  according to VentureSource, the Information Technology industry saw more than $1.5 billion in funds, half of 2008 but formidable enough to be optimistic yet cautious. VC investments in Clean Technology, Consumer Goods, and Industrial Goods as well as Consumer Services actually grew at 2008 levels.

Moreover, more than 63% of all respondents in a December survey from the National Venture Capital Association’s “Venture View” Report expect to rather remain the same or increase from 2009 with 44% forecasting a level between $21-25 billion.

It’s impossible to overly belabor the fact that your neighborhood venture capital firm needs you just as much as you need them and that should be the attitude you take into your research on possible financiers of your business, idea or expansion into new markets.

VC firms raise funds in order to dispense funds, so it’s important to look into the track record of profitability for the VC firms you’re looking to pitch as well as the track record of the companies they’ve funded and what the exit strategies of those companies are.

About the Author
Jabulani Leffall, 33, is an award-winning journalist and writer who attended Journalism School at the University of Missouri. His work has appeared in the Financial Times of London, Dow Jones Marketwatch, The Baltimore Sun, Investor's Business Daily, Variety, CFO Magazine, Compliance Week, Redmond Magazine, Black Enterprise, the Los Angeles Business Journal and the Los Angeles Daily News among other publications. He has been a George Washington Williams Fellow for the Independent Press Association where from 2002 to 2004 he studied the effects of subprime lending on poor communities. After what happened in 2007 and 2008, he feels vindicated as a journalist for having called what was going to happen. What else? Yeah, he also contributed vital research to the 1998 book University of Missouri History Professor Robert E. Weems, which is titled "Desegregating the Dollar." Additionally, he has appeared numerous times on ABC World News and CNN as a commentator of business and world affairs, again pretending to know what the heck he is talking about. Mr. Leffall is currently a the Associate Editor of Special Projects and content with FactSet Research Systems News and Media Relations Group. Lastly for the part where Mr. Leffall lives, he resides in a four cornered room where he stares at candles and his mind plays tricks on him. Read his articles and blogs please lest he go completely mad.
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