Venture Capitalists Turn Positive on Investment Levels and IPOs in 2010, KPMG Study Finds

Much more optimistic than a year ago about revenue growth, valuations and IPO activity

Cleantech seen as most attractive investment opportunity

Jan 05, 2010, 12:13 ET from KPMG

MOUNTAIN VIEW, Calif., Jan. 5 /PRNewswire/ -- SILICON VALLEY -- In contrast to last year, the venture capital community is signaling an uptick in overall venture capital investment in 2010, according to a recent survey by the U.S. audit, tax and advisory firm KPMG LLP. In addition, the KPMG survey found that the venture capital community expects IPO activity and valuations of venture-backed companies to trend upward next year.

In polling 100 venture capitalists and entrepreneurs in the U.S., KPMG found that they are much more bullish on venture investment levels, IPO activity and valuations of venture-backed companies. In fact, the 68 percent of respondents say they expect total venture capital investment to increase in the year ahead - a completely different perspective from a year ago when 74 percent said they expected investment levels to decline. Venture capitalists also expect increases in deal volume (66 percent) and venture fundraising (53 percent).

Last year, 88 percent of VCs surveyed predicted that IPO activity would decline or remain flat. This year, when asked about IPO activity in the year ahead, more than three quarters (79 percent) of those surveyed expect increased activity, indicating a clear positive trend. Forty percent of those respondents expect activity in 2010 to increase by 30 percent or more compared to this year.

"The venture capital industry has emphasized the importance of a vibrant IPO market for the healthy flow of investment capital to emerging companies," said Packy Kelly, KPMG partner based in Silicon Valley and co-leader of its venture capital practice. "An awakening of the IPO market is welcome good news for VCs and entrepreneurs."

Venture Investment

When asked which industry sectors will be the most attractive investment opportunities, Cleantech was the clear favorite, and venture capitalists indicate government stimulus and legislation will continue to affect the sector. Interestingly, however, three-quarters of respondents indicate that that the stimulus and legislation has no effect on their investment decisions. Also highlighted as attractive investment sectors for 2010 were life sciences, and mobile and wireless. Views on which stage of the investment cycle would present the best opportunities were mixed.

According to respondents, China and India are expected to remain very attractive regions for 2010, while Brazil, Israel and Southeast Asia will also see increased venture investment.

Revenue Growth

In addition to the dramatic increase in optimism about investment levels and IPO activity, KPMG also found that 80 percent of respondents expect revenue to increase in their companies or portfolio companies - compared to just 52 percent last year. Sixty percent of those surveyed this year expect revenue growth in excess of 10 percent. A negligible one percent see declining revenues in the year ahead, which is a 25 point improvement from 2008 KPMG survey.

"There is no question that economic and market conditions of the past two years have been difficult for the venture capital community, but we are clearly seeing indications of a light at the end of the tunnel," said Kelly. "Venture capitalists are optimistic about the growth prospects of their portfolio companies in 2010, and a more receptive market for venture-backed IPOs."

KPMG conducted the survey in collaboration with AlwaysON, a venture capital new media organization, in late November and early December.

About KPMG LLP

KPMG LLP, the audit, tax and advisory firm (www.us.kpmg.com), is the U.S. member firm of KPMG International. KPMG International's member firms have 137,000 professionals, including more than 7,600 partners, in 144 countries.


    Contact:       Manuel Goncalves
                   KPMG LLP
                   Tel: (201) 307-7735
                   mdgoncalves@kpmg.com

SOURCE KPMG



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