How Does VC Investments Look For 2012?

Details

By Linda Doell

When looking at venture capital investments for 2012, the saying, is the glass half-empty or half-full comes into play.

Talk to Canadian venture capitalists and a majority of them will look with optimism at their half-full glasses at the begining of 2012.

Ask the opinion of venture capitalists south of the border in the United States and the likely response would be a glass less full.

It might be a matter of perspective.

Canada's Venture Capital & Private Equity Association conducted an online survey in November of its members to measure their outlooks on investment, exit strategies and general investment climate.

Of the 95 CVCA members who responded, 80% said the investment pace over the next six months will remain the same or increase from the previous six months. Another 61% anticipated new investments would get more attention instead of existing investment portfolios or follow-on funding.

"These survey results demonstrate that venture capital and private equity funds see great opportunity in these turbulent times," said CVCA President Gregory Smith, in a prepared statement on the survey. "It is particularly encouraging to see the optimistic view of investing in Canada that emerges. Canada's attractiveness as an investment destination for venture capital and private equity is a competitive advantage for our member funds and for the country as a whole, given the central role the industry plays in fostering innovation and company growth."

When asked to compare Canada's business climate to other regions, CVCA members said Canada's investment climate was better than Europe (73%), Africa (53%) and the Middle East (51%). A total of 87% of respondents felt the Canadian investment climate was the same as or better than the United States.

A look to the south, however, and venture capitalists in the United States expect investments to remain the same or decline. A recent survey from the National Venture Capital Association and Dow Jones & Co. found 69% of VC respondents felt that way -- up from 48% in the previous year's survey.

That sentiment flies in the face of a report released Jan. 20 by the NVCA on fourth quarter and year-end 2011 investing. That data showed that venture capital investing in 2011 was 22% more than 2010 investments (2011 investment activity still lagged behind the peak investment levels seen in 2007 and 2008).

The new report showed that a total of $28.4 billion was invested in venture capital in the United States, with first time fundings increasing since 2010. Last year, 1,159 new companies got funding for the first time, compared with 1,047 in 2010.

It remains to be seen if 2012 will be a half-full glass kind of a year when it comes to venture capital investing. Will the optimistic outlooks in Canada come true? Will picture in the U.S. be as bleak as investors predict? Tell us.