Over the past 10 years, lower returns and the economic downturn has brought financing to the VC pressure. The shrinkage of VC financing will be for the next decade VC industry what kind of change?

In recent years, launched after the Internet bubble burst in the first VC funds in existence at the end of cycle one after another. As we all know, the Internet in the 90’s for the VC and IPO market has created enormous prosperity, then the bubble burst in 2000. VC funds are generally the duration of ten years. 2009 was the first time that 90 out of the ten years than the rate of return is the beginning of 2000 the first post-Internet era, the year of settlement funds. The next few years, a large number of funds launched after the age of the Internet will also be settled one by one after another. As the 90’s Internet boom and the good performance of capital markets, VC investment in the 90 years of age has a nice rate of return transcripts. From 1991 to 2000, VC investments are around 2,000 listed companies, and another close to 1,400 enterprises to be sold. With the market boom reaches 80-90 years of record high average rate of return on investment, VC in the first decade of this century still raise more capital.

However, VC has more capital at the same time, the market did not give more than 90 years of investment environment. Over the past decade, the Internet bubble burst effect caused by industry, IPO market downturn, as well as the financial crisis in recent years have given an enormous impact on VC. According to the National Venture Capital Association data show that in the 2000-2009 decade, VC investment is only 430 listed companies. This figure is only 90 percent little more than two years. After the subprime crisis situation is even worse. 2008, 2009, and 2010 in the first half, but also were only 6, 12, and 26 VC investment in listed companies.

In fact, most companies are VC investments over the past decade, out of the way are to be sold. Data show that over the past ten years more than 3,000 enterprises invested by VC M & A, is 90 times the number of mergers and acquisitions. However, with the IPO can bring out high multiple returns that are different, the return of M & As is often very limited.

Prosperity for the year 2000 brought a lot of VC financing, it also needs to invest more in business. But is it worth the investment project and no significant growth. More VC, more money, make good business investment increasingly fierce competition. Become increasingly difficult to find so much money that can bring a large enough return on investment opportunities. VC rate of return on the market in buying and selling ends of the market is becoming less and less compression.

As the 90’s high rate of return to the VC the first decade of the new century has brought a lot of new capital, in turn, lower returns over the past 10 years, and the economic downturn will bring to the future of VC financing pressure. Difficulties in financing this trend has already begun gradually. According to statistics, in 2007 the United States a total of 217 funds raised more than 40 billion U.S. dollars. 2008, 203 funds raised to 28.7 billion U.S. dollars. In 2009, only 125 funds raised 13.6 billion U.S. dollars. Slight improvement in the first half of this year, raised a total of 7.5 billion, but still much lower than in previous years.

So, VC financing will shrink the VC industry, the next decade what kind of change?

First of all, VC funds to the small size of the development. In the 90’s, more than 200 million U.S. dollars even if much of the VC fund. But over the past decade, raising 500 million or even a single round of managing one billion U.S. dollars of VC is also not unusual. However, the greater the management of capital, the more difficult with a higher overall return. Therefore, small amount of the Fund will be launched to make it easier for fund managers to produce great things. In addition, more and more in the past of successful entrepreneurs and fund managers will become an angel investor or angel of the establishment of smaller investment funds, to carry out direct investment.

Second, VC fund amount will be reduced. Involvement in the economic environment over the past decade, many of the Fund’s performance unsatisfactory. This is for them to continue to the next round of fund raising to be difficult. According to Deloitte and the National Venture Capital Association, a face of the global 500 VC joint survey shows that 92% of U.S. venture capitalists expect the next 5 years will reduce the number of U.S. VC.

Third, the investment model and investment strategy, VC they will adjust. Early periods of new ideas will be even more concern. Since the IPO market and M & A market in recent years, valuations are not very good, it may wish to look beyond their hope in the future, rather than immediate short-term exit. At the same time, less need for capital projects and more popular. Internet and information technology makes the venture capital needed to further reduce the threshold. Capital projects required less bad in the capital market more flexible environment. Require large capital projects funds are more vulnerable to unsustainable situation.

Fourth, some have long-term potential of the industry and may have a breakthrough technology innovation will continue to be favored, especially for those large-class fund, even though these projects often means that large investments. Such as life sciences, clean technology, environmental protection and green products or services. Although the development of new medicines, new medical equipment, or application of new energy such as wind, solar, or nuclear energy use usually requires a longer period of time and a lot of input, but may have a breakthrough and future returns is also extremely significant.

Fifth, the increasing number of VC have also begun to look to emerging markets in search of higher returns and more sources of funding. China is one of most concern to the market. More and more overseas VC has been, or will be, the establishment of the RMB funds or direct investment in Chinese enterprises. China’s economy has been benefiting from strong growth. New stock market listed companies in China the number will reach 300 this year, financing, expected to total 500 billion yuan. This makes China the world’s largest IPO market. The desire to play the “home run” of the VC were, China would be their best stadium.

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Category: Business Management
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