Understanding the changing landscape of venture capital investing
Venture capital is the funds provided at the early stage and growth stage to high potential
, growth companies by institutional investor or high net worth individuals in the interest of generating higher returns. Understanding the changing landscape of venture capital investing, which has been significant over the past few years, requires knowing what a venture capitalist looks for in its investments.
Tracing the history of venture capital will lead you to 1946, just after the World War II. Georges Doriot, a former dean of Harvard Business School and founder of INSEAD, is considered to be the father of venture capitalism. In the early stages, venture capital was used to fund breakthrough projects in electronic, medical, or data-processing technology.
According to PriceWaterHouseCoopers, the venture capital investing has grown by 50% in the USD during the first half of 2010 to USD 6.5 billion in 906 deals. With the increase in confidence about the economic outlook, the venture capital investing in 2010 is set to surpass 2009 levels. It must be understood that venture capitalists are looking for high returns and hence the investments goes to sectors which hold more promise than the others. Few such sectors are software industry, clean technology sector, biotechnology, Industrial/Energy industry and internet specific companies lead the pack here. This is quite a change from the 1980s scenario.
California, New York and Massachusetts are the three prominent US states to receive 70% of the total deals and 65% of the VC funding. Even though, these numbers show a rise as compared to the same timelines of 2009, it is still below par to the 2006-2008 averages. As compared the earlier funding, most of them went to the medical related or internet based companies. Venture capitalists are now becoming more comfortable investing in new technologies as compared to in between years where a proven model was the more preferred flavour.
Understanding the changing landscape of venture capital investing
By: Arunkumar
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