More than three-quarters of venture capitalists plan to increase their investments in healthcare IT next year, according to a recent survey by the National Venture Capital Association and Dow Jones VentureSource.
According to results of the 2011 Venture View predictions survey, 77 percent of those surveyed expect their investments to increase – though there was no consensus on how medical devices aor biopharmaceutical investments would fare. Survey respondents were split almost evenly on whether investment in those sectors would increase, decrease or remain the same.
Overall, venture capitalists predict venture firms will invest more and chief executive officers of venture-backed companies expect to hire more, sell more and get paid more in 2011, according to the survey. They were, however, divided on how fundraising would trend in the forthcoming year.
The annual survey reflects responses from more than 330 venture capitalists in the United States and 180 CEOs of U.S.-based venture-backed companies collected between November 29 and December 10.
"At this time last year, the venture capital industry was optimistic, but cautiously so," said Mark Heesen, president of the NVCA. "The market was so troubled in 2009, the sentiment was that things had to get better in 2010. It turns out our predictions were correct and in the past year we have moved beyond the financial crisis and returned to doing what we do best – building great companies.
"The improving exit market and a renewed excitement in the IT sector have engendered a confidence among VCs and the CEOs of the companies in which we invest that promises to propel the start-up community forward in 2011," Heesen added. "While the venture industry will continue to evolve and likely contract, the companies we fund will continue to grow, innovate and drive the U.S. economy."
According to the survey, 51 percent of venture capitalists expect venture capital investment to pick up in 2011, while 24 percent expect investment to remain the same and 24 percent expect investment will decrease. In addition, 51 percent predict increases in later-stage investment, while 49 percent see increases in expansion and seed investment and 46 percent see it in early-stage investment. Of those who invest in the earlier stages, 30 percent plan to co-invest more with angels.
Among CEOs, 58 percent predict an increase in venture investing, and 64 percent plan to raise a round of financing in the year ahead.
In a departure from recent years, when asked about their predictions for industry sectors, more venture capitalists expect investments to increase in information technology than in the life sciences or clean technology sectors. Investments in consumer Internet and digital media (82 percent), cloud computing (80 percent) and mobile/telecom (66 percent) are anticipated to increase in the year ahead.
However, venture capitalists also say consumer Internet and digital media (69 percent) and cloud computing (47 percent) are the two sectors most likely to see investment "froth," a term used among the venture community to suggest over-investment.
Fear of a clean technology bubble may be subsiding, as only 28 percent of venture capitalists identified the sector as likely to see investment froth in the year ahead and only 38 percent expect increases in energy investment.