The VC Market in The United States of America
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The United States of America are famous for their venture capital firms. Until few years ago, they have been the most powerful funding agent in the world. But, due to the financial crises, their interest in funding has decreased during the last two years. Venture capital firms—and the high-tech startups they support—are historically concentrated in suburban office parks, such as Silicon Valley and North Carolina’s Research Triangle. Some VC’s say a shift underway within the venture capital community away from the suburbs and towards urban areas. Overall, the San Francisco Bay Area remains the leading center of venture capital investment by far. But San Francisco now attracts more venture investment than the Silicon Valley area. Together, these two Bay Area centers (Silicone Valley and San Francisco) account for more than $10 billion in venture investment, roughly 40 percent of all dollars invested, along with 30 percent of all venture capital deals. Boston ranks third, but New York is close behind. This fact alone supports the contention of a more general urban shift of venture capital from the suburbs.
The History of Venture Capital The United States
Investors have been acquiring businesses and making minority investments in privately held companies since the dawn of the industrial revolution. However with a few exceptions, private equity in the first half of the 20th century was the domain of wealthy individuals and families.
As 2003 got underway, venture capital investments began a five year resurgence that would ultimately result in the completion of 13 of the 15 largest leveraged buyout transactions in history. This was an unprecedented level of investment activity. The combination of decreasing interest rates, loosening lending standards and regulatory changes for publicly traded companies would set the stage for the largest growth venture capital had seen. There was a snag though with the passing of Sarbanes Oxley (SOX) Compliance. During this time of regulation, many public company executives weighed out the extra cost and bureaucracy associated with Sarbanes-Oxley compliance. The increased compliance costs would make it nearly impossible for venture capitalists to bring young companies to the public markets and dramatically reduced the opportunities for exits via IPO. Even though regulatory reform was well on its way, 2003 through 2007 was still considered an opportunistic time period.
Current Trends
Bio technology is taking a front seat (in addition to technology and communications) to development of new startups. Efraim Landa is an entrepreneur who has devoted some of his resources to medical development. With recent efforts by the U.S. Food and Drug Administration to get drugs to patients faster, when drugs are geared for a specific population, we could see more and bigger VC investments in biotech companies taking faster tracks. 49 venture investments were backed by pharma (pharmaceuticals) VC in 2012. With an extensive analysis of VC firms, it’s become clear that pharma VCs are moving to early-stage financing, with 25% of total financings in 2012. There will always be a small group of specialty VCs that will always be financing the new creative phama ideas. However, there are only so many of them. This leaves many start-up ideas out in the cold waiting for the day when more risk-averse dollars flow back into the sector.
Summary
VC-backing has been the catalyst for ideas being transformed into commercial realities, creating new highly skilled jobs and creating new and innovative companies that will and have become market leaders in their own right. So, even though the market is still rather unstable, venture capitalists start to regain their trust and to look for profitable businesses to fund. You should though keep in mind that they continue to be prudent and to ask for a very well-done business plan when considering your offer.
The History of Venture Capital The United States
Investors have been acquiring businesses and making minority investments in privately held companies since the dawn of the industrial revolution. However with a few exceptions, private equity in the first half of the 20th century was the domain of wealthy individuals and families.
As 2003 got underway, venture capital investments began a five year resurgence that would ultimately result in the completion of 13 of the 15 largest leveraged buyout transactions in history. This was an unprecedented level of investment activity. The combination of decreasing interest rates, loosening lending standards and regulatory changes for publicly traded companies would set the stage for the largest growth venture capital had seen. There was a snag though with the passing of Sarbanes Oxley (SOX) Compliance. During this time of regulation, many public company executives weighed out the extra cost and bureaucracy associated with Sarbanes-Oxley compliance. The increased compliance costs would make it nearly impossible for venture capitalists to bring young companies to the public markets and dramatically reduced the opportunities for exits via IPO. Even though regulatory reform was well on its way, 2003 through 2007 was still considered an opportunistic time period.
Current Trends
Bio technology is taking a front seat (in addition to technology and communications) to development of new startups. Efraim Landa is an entrepreneur who has devoted some of his resources to medical development. With recent efforts by the U.S. Food and Drug Administration to get drugs to patients faster, when drugs are geared for a specific population, we could see more and bigger VC investments in biotech companies taking faster tracks. 49 venture investments were backed by pharma (pharmaceuticals) VC in 2012. With an extensive analysis of VC firms, it’s become clear that pharma VCs are moving to early-stage financing, with 25% of total financings in 2012. There will always be a small group of specialty VCs that will always be financing the new creative phama ideas. However, there are only so many of them. This leaves many start-up ideas out in the cold waiting for the day when more risk-averse dollars flow back into the sector.
Summary
VC-backing has been the catalyst for ideas being transformed into commercial realities, creating new highly skilled jobs and creating new and innovative companies that will and have become market leaders in their own right. So, even though the market is still rather unstable, venture capitalists start to regain their trust and to look for profitable businesses to fund. You should though keep in mind that they continue to be prudent and to ask for a very well-done business plan when considering your offer.