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More than half of VC execs consider industry to be broken, survey finds

More than half (52.9 per cent) of venture capital executives believe their industry is ‘broken’, according to an online survey by Polachi.

More than half (52.9 per cent) of venture capital executives believe their industry is ‘broken’, according to an online survey by Polachi.

The survey also found that despite increasing indicators from the Federal Reserve that the recession is lifting, nearly two-thirds (59.9 per cent) of respondents are less confident about the state of the VC industry today than they were six months ago.

‘These survey results validate a cautious sentiment we have been observing for some time now in the VC industry,’ says Charley Polachi, partner at Polachi. ‘While we certainly acknowledge that somewhat of a reset is needed, we also believe venture firms play a critical role in the development of new technologies and start-ups, which are vital to the economy for growth.’

When asked to identify which functional trends they were most concerned about, nearly all (92.7 per cent) of the executives indicated they were either ‘worried’ or ‘most worried’ about the uncertain return of exit markets. Also found to be of concern was syndicate risk, with 69 per cent of the respondents expressing some degree of worry over the ‘ability of syndicates to hold together’.

‘Reduced funding from investors and depressed exit prices are changing venture capital,’ says Paul Margolis, partner at Longworth Venture Partners. ‘As long as these trends continue, VCs will need to be more efficient with capital and find ways to get acceptable returns at lower exit prices.’

When asked about the hottest growth areas in the VC industry, cleantech/energy received the highest response (62.8 per cent) followed by consumer internet/web 2.0 (44.2 per cent) and internet marketing (40.1 per cent).

The survey also found executives to be split down the middle when it comes to which geographical region currently represents the area of hottest investment opportunities; 40.7 per cent indicated the east coast and 43.7 per cent indicated the west coast/Silicon Valley.

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