GLOBAL - Nearly a third of venture capitalist firms are investing more during the current economic slowdown, a new survey from Deloitte & Touche shows. The survey - Private Equity Confidence Survey - found that 29%of venture capitalists thought investment realisations from re-financings would be increased.
Deloitte & Touche corporate finance partner Quintin Barry said: “Some houses are actively investing and taking advantage of the reduced competition and more realistic pricing. Historic fund returns suggest that investing at good prices through a slowdown can bring strong returns.”
The survey found that 80% of venture capitalists expect the economy to decline further in the next six months. This compares with last quarter’s figure of 55% when fears appeared to have eased slightly.
Barry added: “VC confidence has waned this quarter as the economic picture becomes clearer. It seems that VCs expect the economy to deteriorate further.”
PECS said 70% of respondents expected fundraising to suffer and predicted a decline in the availability of debt finance.
Only 5% of VCs expected activity to return to previous levels within six months compared to 62pc of those who said it would take 12 months.During the economic slowdown 72% of VCs are set to continue buying and only 9% expecting to be net sellers.
British Venture Capital Association chief executive John Mackie said: “The feedback I’m getting from my members is that companies are optimistic about the current state of the economy. Our business however is a long term business with ten year periods being more appropriate to measure predictions rather than six months. In the long term economic fluctuations iron themselves out.”
He added: “If you look closely at the detail of the report out of seven consecutive quarters this quarter has seen a economic improvement. It is significant that there is cheaper buying rather than more buying during economic declines – which is not necessarily the same thing.”
The survey was quizzed 770 venture capitalists and was conducted between mid-April to June this year.
By Shifa Rahman
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