The VC industry is in good shape

April 19, 2012

Writing at Forbes, Todd Hixon reports on indicators which suggest the venture capital industry is in good shape:

  • Entrepreneurial innovation has picked up over the last five years.
  • Exits are back in both quantity and quality, and should be aided by the JOBS Act.  
  • New software methods have shrunk the cost of starting a software company. 

The article seems written from a little bit of a East- or West- coast perspective, and perhaps with a slight early-stage tech bias.  Our business model is not dependent on the IPO market and is diversified both geographically and across several sectors, so we still enjoyed an increase in deal flow throughout the “down” decade Hixon contemplates.  But it’s still good to hear our industry has rebounded.  Here’s Hixon:

Venture capital returns took a huge hit in 2001-2003, when the tech bubble collapsed — investors lost 40% in two years. Since then the industry has been recovering, and the severe 2008-2009 financial crisis produced only a small dip. Absent the financial crisis, returns have been in the 12%-16% range.

Half the supply of venture capital has disappeared since 2006. The cost of starting businesses is way down. Exits have rebounded, and the “IPO On-Ramp” provisions of the JOBS Act promise further upside. Fundamentally, the prospects for Venture Capital investment look very bright.



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