2013 was a turning point for venture capital (VC) investment. As economic conditions improved in many markets, increasing levels of liquidity, coupled with strengthening investor confidence and a more positive exit environment, resulted in a slight increase in the global total of VC investment compared to 2012. However, this report reveals a fascinating range of variation in VC activity in different geographic hotbeds in 2013 that highlights some enduring truths about the VC industry: namely, its ability to constantly adapt and react to changes in market conditions and consistently support the growth of the world’s most dynamic start-up companies and to deliver returns for investors.
A number of trends emerged or gained momentum in 2013. Angel investors are becoming more significant and better organized expanding their presence at the start-up stage as VCs become more risk averse and shift their attention to later-stage investments. Technology has enabled new mechanisms such as crowdsourcing, which is changing the funding environment at the early seed stages. Corporates looking to fund innovation gaps or to reinvest surplus cash are pioneering new ways to collaborate with fast-growth businesses and with VCs. And governments in many countries are becoming more “switched on” in
terms of taking positive steps to create entrepreneurial ecosystems in which venture finance can thrive.
These changes have challenged VC players to change and raise their game. They have become more global in their geographic outlook, more sophisticated in their analysis of opportunities and more innovative in terms of how, where and when to invest. The result has been a trend toward consolidation among those unable to read or respond to the changing environment.
Courtesy of EY