Is your business venture in a good position to qualify for venture capital?
Like the rest of the economy, Venture Capital firms have been relatively lethargic since the bubble burst in late 2007. If you weren't the next Google or Facebook, VC money has been hard to come by.
The good news is Venture Capitalists have finally become optimistic about growth in the general economy and highly optimistic about growth in the Retailing/Distribution sector. The bad news is lackluster investment growth in the Financial Services and Medical Devices & Equipment sectors; not to mention a significant pullback on investment in the Networking & Equipment sector. Nationwide, VC’s invested $29.5 billion in all sectors in 2013. In the first quarter of 2014, VC’s invested $9.5 billion up $3.5 billion (57%) from the $6 billion first quarter of 2013.
Why does it matter? Venture capitalists tend to make their decisions with one eye on the road ahead and the other eye on the rear view mirror. If you know the industries where they have achieved the most success, you have some insight as to where they are open to make new investments. If you’re looking to start or acquire a business, this is also an indicator for where to aim your guns.
. TOTAL VC INVESTMENT* USD $ (000,000)
. Qtr 1
INDUSTRY YEAR 2013 Qtr 1 2013 Qtr 1 2014 % Delta
Biotechnology 4,655 871 1,062 22%
Business Products & Services 218 27 86 222%
Computers & Peripherals 517 68 188 176%
Consumer Products/Services 1,259 366 525 44%
Electronics/Instrumentation 326 73 78 7%
Financial Services 566 71 269 278%
Healthcare Services 193 22 77 245%
Industrial Energy 1,491 218 518 138%
IT Services 1,965 258 816 215%
Media & Entertainment 2,963 534 743 39%
Medical Devices/Equipment 2,102 562 588 5%
Networking & Equipment 673 376 21 -95%
Other 98 11 3 -75%
Retailing/Distribution 237 17 251 1,338%
Semiconductors 601 142 172 21%
Software 11,074 2,333 4,009 72%
Telecommunications. 644 63 63 0%
Grand Total 29,508 6,014 9,469 57%
*Represents only the value of deals where the purchase price was disclosed.
Business sectors which should be hot for 2014:
Retailing/Distribution up 1,338%
Financial Services up 278%
Healthcare Services up 245%
Business Products & Services up 222%
IT Services up 215%
The Software sector while up only 72% is still more than a safe bet. The reason? It’s huge. It represents 42% of all the 1st quarter 2014 capital investment by VC firms.
Business sectors experiencing a pullback in VC investment:
Networking & Equipment down 95%
Other down 75%
Mapping trends is one example of the insights and tips for starting or expanding your own business that I teach in my online Bizar Financing course. Check out my free online video Getting Rich Your Way and see how other entrepreneurs are using my methods and strategies to start, buy or expand their own successful businesses using little or no cash of their own.
