National Venture Capital Association released its annual survey of VC predictions for next year this morning and it doesn't look good for small startup companies. Though most VCs said they expected more money to be invested next year, most predicted a contraction in the number of firms available to invest, a decrease in seed and early-stage funding and an emphasis on large sums invested in more established companies seeking further growth.The
That's not good for early-stage innovation, something the association acknowledges in its published report.
The survey was based on responses from more than 325 venture capitalists across the United States. Forty five percent of respondents predicted growth in early- and seed-stage investments.
"Of all the predictions put forth this year, a collective lack of enthusiasm for seed and early stage investing is the most concerning," said Mark Heesen, president of the NVCA. "The weak exit market combined with proposed tax policy, which would discourage long term investment, puts tremendous pressure on our industry to move towards later stage investing. Yet, seed and early stage companies represent a pipeline that must be supported if our country is to continue building new and innovative companies. We need the environment to improve for these early stage investors."
If you're one of those cynics that thinks the VC industry funds too many crazy pointless ideas, then perhaps this reads like good news. If you're a small startup hoping to break into the Silicon Valley insider's club that is VC funding, then this probably isn't good news for you. And if you're an early adopter of new technologies, hungry to see all kinds of innovation change the world and are indifferent to the fortunes of investors - then this risk aversion probably isn't good news for you either.