Venture capitalists are slowly becoming more optimistic about the prospects for the industry, according to the Q1 Private Equity Confidence Survey published by Deloitte & Touche.
The report suggests that, whilst the mood isn’t exactly buoyant, the majority of venture capitalists believe the current market is steady and that an upturn in fortunes is probable over the coming year.
The survey, which sought the opinions of 770 largely UK-based venture capital professionals, found that 55 per cent of VCs expect an increase in deal activity over the next six months. This figure is coupled with an upturn in confidence in the economic climate, the first since Q2 1999, with over 70 per cent of those questioned believing the economy will remain steady (55 per cent) or improve (17 per cent) this year.
69 per cent of VCs expect the IPO market to be more favourable over the next twelve months, a perception that clearly draws on a growing amount of evidence to recently have come out of the new issues market that a revival might already be underway.
In terms of sectors offering the most promising investment opportunities, one of the biggest surprises is the re-emergence of the TMT sector. 19 per cent said they expected to focus on opportunities within technology, telecoms and media as a result of lowered valuation levels and an increase in forced sellers. Other sectors of interest include support services (24 per cent) and healthcare and pharmaceuticals (15 per cent).
There is also an upturn in confidence among VCs about the prospects of securing debt finance for transactions, which in Q4 2001 reached its lowest level since 1999. 23 per cent of VC professionals believe funding will be available this year, against a figure of 17 per cent in Q4. However this is still some way below the 30 per cent of VCs that expect a further decline in the availability of debt finance.