VC execs: Number of active funds to drop
Deloitte survey obtained by Calcalist reveals VC funds to focus primarily on later financing rounds, leaving seed stages for emerging micro-funds
Eighty-seven percent of the survey's participants forecast that the upcoming year will see a decline in the number of active funds. The remaining 13% are not much more optimistic, but predict little change in the current state of affairs.
Not one of the 60 participants expects technology financing to grow in the upcoming year.
"Fewer Israeli funds are managing to obtain later stage financing and the scope of acquisitions by portfolio companies is not very impressive as well," says accountant Tal Chen, partner and head of technology at Deloitte Brightman Almagor Zohar.
"While the number of traditional VC funds is dropping, we are witnessing the advent of seed financing support and aid bodies and micro funds which hold much less resources."
Deloitte's survey, the VC Indicator, shows that startup financing rounds over the next six months will be more challenging as compared with 2011.
Sixty-nine percent of the VC executives believe that entrepreneurs will have a harder time raising seed capital as compared with last year, whereas only 6% of the survey's participants expect financing to become easier.
On the other hand, the forecast for the upcoming six months shows a substantial climb in late stage investments and 22% of the participants said they would investments principally in later stage rounds, as compared with less than 6% in the past year.
VC execs are not optimistic when it comes to the scope of their investments in startup companies: Thirty-nine percent forecast that in the next six months, their investments will drop as compared with only 13% who had the same forecast in last year's fourth quarter.
Only 10% believe their investments will grow in the said period.
Nonetheless, Internet will continue to be the main focus of investments as it is a field that requires little resources and yields results in a relatively short time. Seventy-nine percent of the VC executives expect most deals and mergers and acquisitions to be in this field.
Another promising sign for internet investments is the fact that 68%of the participants predicted that the number of internet deals will rise in the next six months. Seventeen percent forecast more software deals as compared with 69% who thought so last quarter.
Furthermore, the cleantech field is perceived by participants as the least attractive arena for M&A deals (11%).
Chen notes that "the hype around Facebook's upcoming offering and reports of its performance sparked a wave of interest in internet and new-media VC investments and this will have an effect on Israeli companies operating in the field."
VC fund managers predict that most investment opportunities are in cloud computing (50%), big data (50%) and online social marketing and commerce (46%).
This report was originally published in Hebrew by Calcalist
