As expected, the economic downturn is hitting venture capital hard. The top challenge for Washington state VCs for the first quarter of 2009 will be the availability of capital—ahead of the national economy and overall market growth.
That’s according to the Washington Technology Industry Association’s Q1 2009 venture capital outlook survey. The quarterly survey tracks local VC firms’ indicators of deal quality, quantity, expected exits, and business metrics for their portfolio companies.
The outlook for deal flow and valuations is fairly bleak. No venture capitalists surveyed predicted growth in valuations would be similar with the last quarter in any stage of new investments. However, 44 percent of VCs did predict moderately better deal quality this quarter.
As for their portfolio companies, two-thirds of respondents predicted their companies’ revenue growth would be moderately or substantially worse than in the fourth quarter of 2008. And unlike last quarter, when most VCs predicted no major changes in hiring, 54 percent now predict a decrease of at least 10 percent. Lastly, no IPOs are expected this quarter, but one-third of the VCs surveyed predicted at least one of their portfolio companies would be acquired.
Author: Gregory T. Huang
Greg is a veteran journalist who has covered a wide range of science, technology, and business. As former editor in chief, he overaw daily news, features, and events across Xconomy's national network. Before joining Xconomy, he was a features editor at New Scientist magazine, where he edited and wrote articles on physics, technology, and neuroscience. Previously he was senior writer at Technology Review, where he reported on emerging technologies, R&D, and advances in computing, robotics, and applied physics. His writing has also appeared in Wired, Nature, and The Atlantic Monthly’s website. He was named a New York Times professional fellow in 2003.
Greg is the co-author of Guanxi (Simon & Schuster, 2006), about Microsoft in China and the global competition for talent and technology. Before becoming a journalist, he did research at MIT’s Artificial Intelligence Lab. He has published 20 papers in scientific journals and conferences and spoken on innovation at Adobe, Amazon, eBay, Google, HP, Microsoft, Yahoo, and other organizations. He has a Master’s and Ph.D. in electrical engineering and computer science from MIT, and a B.S. in electrical engineering from the University of Illinois, Urbana-Champaign.
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