Washington State’s venture capital community shows a slightly more optimistic outlook for the coming quarter, according to the results of the Q4 2009 Venture Capital Outlook Survey from the Washington Technology Industry Association.
In what may be a reflection of the beginnings of a broader economic recovery, for the third consecutive quarter predictions are more positive than the previous quarter.
Overall, the main concerns for VCs in the coming quarter include overall market growth, national business conditions, and attracting and retaining senior leadership for their portfolio companies.
"It’s encouraging to see the venture community predict a slowdown in company layoffs, and to also see a gradual improvement of valuations for both mid- and late-stage deals," says Ken Myer, president and chief executive of the WTIA. "We appear to have reached a point of stability, with job losses expected to slow yet hiring not projected to increase. Hopefully we are turning a corner but concern remains given the slow economic recovery and the impact on company sales."
The survey, which is sponsored by Ernst & Young, queries top local VC firms about indicators for the coming quarter and covers topics such as deal quality, deal quantity, expected exits and various business metrics for their portfolio companies.
Layoffs are predicted to decline sharply in Q4. Eleven per cent of respondents predict their portfolio companies will reduce workforces by more than ten per cent, a sharp decrease from the 50 per cent of respondents who expected similar-sized layoffs last quarter. In the near term, however, hiring is not expected to increase.
The survey also found that 67 per cent of participants predict a moderate increase in late-stage investments, up from 27 per cent last quarter. This is the most optimistic forecast among all stages this year.
Thirty-three per cent of participants predict moderately higher investments in this category – up from just 18 per cent last quarter. Twenty-two percent of respondents predict moderately lower early-stage investments, down from 36 per cent last quarter.
Investment plans, both new and follow-on, remain similar to last quarter. Seventy per cent of participants in the survey plan to make one to two new investments in Washington state companies in Q4.
