Venture Capital Predictions For 2011

Venture capital has been swatted around like a fly at a fly swatter convention the last few years. Will 2011 be more of the same? Let’s have a go at a few venture capital predictions. 

Venture capital is dead! Long live venture capital! The plight of the VC industry has be both played up and down the scope of opinions from gurus, old pros and financial journalists. As usual, most of these opinions are based on pie in the sky opinions that pick and choose the facts they need to support their particular view in lieu of other information that suggests the opposite. Well, let’s join in!

2008. 2009. 2010. These three years may be referred to as the dark ages of funding. The industry took a beating unlike any we’ve seen. Funding was down, down, down and then there was the tax code attack on it in combination with the attack on hedge fund managers. Ultimately, that attack died and we even observed a bit of a rebound in funding in 2010 compared to the deadly hollow of 2009.

So, what can we portend for 2010? The simple fact is the VC market is a shadow of its former self. It will remain so in 2011 unless the overall economy picks up speed and we see the financial markets turn around. It is important to realize that the investors in funds are holding assets that may now be under significant stress because of the economic downturn. Until everyone views the future positively, why would then venture large amounts of money on startups? 

This is not to say that you should discount venture capital when looking for funding. The market still exists and rounds of financing are happening every day. There is simply a lot more competition for that funding. You need to really hone your presentation and focus in on those funds that realistically would be interested in your business area. Do this and your chance of funding will improve greatly.

2011 is shaping up to be a flat year in venture capital. If the economy finally starts purring along at a decent rate, then things could loosen up. Make sure you pay close attention to developments.