Optimism among venture capitalists

25 March 2002

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According to the latest quarterly Deloitte & Touche Private Equity Survey, venture capitalists are optimistic that trading conditions will improve. The findings reveal the first significant upturn in VC confidence in the economy for almost three years, with VCs also optimistic about the performance of investee companies, deal activity and funding availability. 92% of the VCs surveyed expect the performance of their investee companies to improve or remain the same, compared with 42% of last quarterâ€™s respondents. This optimism is reflected in high expectations of the economy, which 72% of the VCs questioned think will improve or remain the same. Only 28% expect economic conditions to worsen, which compares favourably with last quarterâ€™s statistics, which showed that 82% of VCs thought the economy would deteriorate further. VCs also expect to see an increase in deal volume over the next six months, and anticipate a decrease in transaction volume.

Confidence has been fuelled by positive sentiments about debt and fundraising in this quarter. The number of VCs expecting a further decline in the availability of debt finance has shrunk by 49% since the previous survey. The majority of those surveyed foresee a recovery in the IPO markets within the next 12 months, although only 17% of respondents expect to become net sellers in the next six months. In terms of sector focus, it seems that telecommunications and financial services will enjoy renewed popularity. The survey was carried out amongst over 770 VCs in order to act as a barometer of market sentiment.