Note: The Skinny blog is written by Rick Smith, editor and co-founder of WRAL Tech Wire and business editor of WRAL.com.
RESEARCH TRIANGLE PARK, N.C. – There’s good news and bad news about the information technology sector when it comes to investing next year.
As for clean tech, medical devices and biotech, look for less money to flow to those sectors.
The good news for IT: This will be the hot investment sector in the venture capital industry in 2012, venture capitalists said in a survey released Wednesday.
The bad for IT: High-tech will be hit by “investment froth” – a venture term referring to over investment.
Meanwhile, VCs are forecasting big drops in clean tech, medical device and biopharma investments.
The National Venture Capital Association and Dow Jones Venture Source collaborated on the sixth annual survey that drew responses from more than 250 VCs and a similar number of CEOs of venture backed firms.
• 32 percent of VCs expect funding to increase, but 36 percent expect a decline and 33 percent expect no change.
• CEOs are more optimistic with 45 percent expecting growth with 25 percent predicting a decline and 31 percent expecting no change.
• However, those percentages are down from a year ago when 58 percent of CEOs and 51 percent of VCs predicted growth.
Where are the dollars going?
• A whopping 64 percent of VCs predict an increase in consumer IT investments.
• 61 percent expect growth in healthcare IT.
• 50 percent predict growth in business IT.
The big predicted losers:
• Clean tech (down 55 percent)
• Medical devices (down 58 percent)
• Biopharma (down 58 percent)
Where is the “froth”?
• 73 percent of VCs predict too much investment in consumer IT.
• No other sector comes close, with healthcare IT second at 26 percent and business IT third at 19 percent.
• Early stage funding is expected to be tight by 58 percent of VCs.
• VCs and CEOs also expect a hard time raising money.
• In terms of exits for VCs, 48 percent expect fewer initial public offerings this year. A year ago, 67 percent expected an increase.
“When compared to last year’s survey, forecasts from venture capital professionals and venture-backed CEOs are less confident and more measured for the coming year, with few notable bright spots,” the NVCA and Venture Source concluded.
Elections are helping to cloud the future, said Mark Heesen, the NVCA president.
“Due to the large number of market and political factors at play, it is incredibly difficult to predict the state of the venture capital ecosystem in 2012,” Heesen said.
Sounds like Luke Skywalker asking Yoda about using the Force to see the future.
Heesen describes these factors as “uncertainties” which are the reasons for what he labeled as “less sanguine predictions” compared to a year ago.
The VC industry has no doubt recovered a great deal from the depths of the recession in 2009, but the “dot com” boon and the post-2002 recession recovery are becoming increasingly distant memories of much better times.
What did the VCs say in their survey responses? Read a selection here.
How about comments from the CEOs? Read here.
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