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
