VC Outlook 2001 - 02 Survey
Why this Survey ? |
Methodology |
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Venture backed companies in the US raised less money in the first quarter of 2001 than they have since the second quarter of 1999. Total VC investment in the US rose from $39.7b during the three years between 1996-98 to $46b in one single year 1999 and went up further to $87b in 2000. Average deal size too went up from $6m to $11m and $17m, respectively, in the same periods. But in the first quarter of 2001 only 705 deals were struck (less than half of those in the first quarter of 2000) at an average deal size of $14m. The great VC rush seems to have slowed down for a reality check. |
The survey was conducted in the first quarter of year 2001-02. This was a web-based survey which enabled us to collect the responses on our server, directly through the internet. The survey contained 16 closed and open ended questions through which the VC funds were expected to communicate their outlook for the industry for the year 2001-02 in particular and the long term in general. The survey was sent to 48 venture capital funds / companies operating in India. As many as 32 (with total funds of about USD 2 billion) of the 48 VCs (66 %) responded. |
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All over the world, recession has been forcing central banks to take steps for combating it. The Fed has recently made the fifth rate cut in five months, bringing down the Fed rate to 4 per cent - the lowest since April 1994. The European Central Bank has also cut the rate by 25 basis points. The NASDAQ has fallen by 26% in Q1 2001 and is tottering around the 2000 mark since. Japan's stock markets have hit a 16-year low. The global slow down is affecting businesses everywhere. |
The responses have been collated and analyzed in this report. Analysis has been done in terms of percentage of respondents electing for a particular choice in the case of closed ended questions. Further, segment wise analysis was done by segmenting the responses in 4 categories on the basis of their funds size. Also, each of the responses of each segment were weighted with the funds size of the segment to measure the impact of the response on the industry as a whole. |
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Indian industry too is passing through a low growth phase. It has registered a mere 4.9 per cent growth during 2000-01, as compared to 6.6 percent in the preceding year, with a distinct slowdown trend setting in since December. This sharp fall in industrial growth has mainly been on account of the negative growth of the capital goods sector. This sector grew by -1.8 per cent in April 2001, as compared to 10 per cent in the corresponding period of the previous year. |
Three responses to the open ended questions have been presented verbatim at the appropriate places. Three of the questions had multi-choice answers; responses to these questions have been presented in tabular format, with the answers representing percentage of the 32 respondents selecting each of those choices. |
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With capital markets too plummeting to their lowest levels since 1993, a question that strikes one's mind is – what will be the likely scenario in 2001-02, with respect to the Indian VC industry? |
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VentureAhead.com contacted 48 VC funds, which are investing in India, to find out. |
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Overview
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