New survey shows stoical VC interest in technology

SAN FRANCISCO: According to a new survey, venture capitalists are

still investing in technology and telecoms, and are looking for proof of

solid business plans.



Golin/Harris conducted face-to-face interviews with 25 VC firms to

assess how their investment patterns have changed in the past year, what

industries they are most interested in, and how much money they are

committing to new companies.



Tim Johnson, MD of Golin in San Francisco, said the survey demonstrates

two key points for PR firms: "The first is a renewed focus on

established companies not necessarily in the most profitable sectors,

but with proven revenue streams," he said.



"The second is a de-emphasis on many sectors considered high-growth,

such as security."



Before VCs will consider companies for funding, certain criteria must be

met. Almost 80% said that companies must have an "impressive and

well-qualified management team" with experience in large enterprise

markets.



"We like to see major enterprise-type experience," replied one VC

firm.



"We don't invest in career entrepreneurs and quality managers who can

find ways to make money in any economic environment."



Others VCs continue to endorse the start-up dream of innovation and

creativity.



"We are looking for entrepreneurs who want to change the world," was the

response from VC firm Draper Fisher Jurvetson. "We like to keep an open

mind and consider unique opportunities."



VCs have long required seats on the board of directors of the companies

they fund, and that trend is not going to change, according to 80% of

those surveyed.



But some of the firms said they only exert more control of management

teams when the company deviates from the original business plan.



Most of the firms surveyed that had previously invested in technology

continue to do so. Surprisingly, the telecoms sector, which has been

severely hit in the current economic downturn, continues to attract the

majority of funding for 45% of the firms surveyed.



"I was surprised at the large focus on telecoms," Johnson said, "since

many smaller telecom companies are stumbling badly due to

overcapacity."



The poll reflects some change in investment attitude toward medical

equipment and biotechnology, with a 5%-10% increase in funding among 15%

of those surveyed. But with many PR firms pinning their hopes on the

biotech business, was the change significant? "We were surprised the

shift wasn't larger, but we believe this is due to the fact that biotech

is an industry with very different dynamics and needs," Johnson

said.



Johnson added that PR can help companies secure funding by demonstrating

the market need for their technology, and "clearly communicating the

company's value proposition."



KEY FINDINGS FROM GOLIN HARRIS

- 90% haven't tightened policies to control management activities

- 80% are interested in companies led by CEOs with previous start-up

experience

- 65% require at least one board seat on most investments

- 45% of VC firms are focusing on telecoms equipment, software, and

services sectors



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