Is your startup in for the win? Are you prepared for the new direction VC investors choose to head into? You’d better ask yourself these questions, if you want to see your startup funded. Whether it is cloud computing, robotics, or mobile tech, that’s where the cash seems to be flowing.
Where does a VC want to invest today? Check out this survey.
In a post for CNET.com Dara Kerr presents the results of the new survey by the National Venture Capital Association and Deloitte, which did their annual Global Venture Capital Confidence survey this August. This survey shows that VC investors are attracted by the tech world, which is on the rise. Why this happens is explained by Jim Atwell, the national managing partner for Deloitte’s Emerging Growth Company: “It’s very positive results on the market overall, and very positive on tech. Tech companies are the sectors that have the most confidence and the most excitement around them.”
In this survey, more than 300 VC firms around the world were questioned in May and June this year. They were asked about how they view global investments and their confidence in the market and specific industries. As Dana Kerr mentions, the survey highlights the rise in the investor confidence for 3 years in a row.
The survey had a scale from 1 to 5. The highest global investment confidence was in cloud computing, which earned a 4.11 ranking, and the national manager explained this by suggesting that cloud computing requires less capital to build. Next, followed mobile technology with a 4.02 ranking, then health IT and services with 3.94. There was also a marked interest in software, social networking and robotics.
Silicon Valley’s VCs are interested in technology
As the guys from CBInsights.com show, Silicon Valley has always promoted and financed the growth of emerging tech companies. Some of the greatest tech companies it sponsored, which are also headquartered in San Francisco, are Pinterest, Square and Uber.
Since 2009, Venture Capitalist firms have invested $31.5 billion in 3.308 deals into Silicon Valley-based tech startups. According to CBINsights.com Silicon Valley has taken over 40% of the VC deals and over 50% of the funding offered to tech startups across 7 major US venture hubs, among which are New York and Massachusetts.
Successful investments in technology
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If we want to know where Venture Capitalist firms’ money go, we should take a look at some of the successful investments.
As Hannah Kuchler shows in her article, Pinterest in one of the companies that raised money from VCs last year. It managed to raise $425m from 2 rounding funds. It is an online scrapbooking site, in which you are connected to a lot of people and can share your ideas with them. The research firm PrivCo. showed that Pinterest took both the third and the fourth largest funding rounds of the year.
In the early stages the online pinboard was unprofitable, because it tried to generate revenue from advertising. Now its valuation rose by more than 50%, to $3.8 billion beween the 2 rounds.
Another example is Uber, a fast-expanding taxi-booking service. In 2013 it raised the largest single round, taking $361.3m from Google Ventures, TPG Capital and Benchmark. Researchers from PrivCo. suggest that Google invested 83% of its annual investment budget for 2013 in Uber.
There was also the Swedish startup Spotify, which is a commercial music streaming service. It offers music from record labels including Sony, Warner Music Group and Universal. You can browse and search music by artist, album, genre, playlist, or record label. It was launched in 2008 and in 2010 it had about 10 mill. users, while in 2012 it reached 20 mill users, with 5 mill. paid subscribers. In May 2014 it had 40 mill. users, with 10 mill. subscribers. Spotify also had the second largest single round of $250m.
The Canadian company HootSuite, a social media management tool, was on position number 8, with a $165m. round. Hootsuite is a management system for brand management. It was created in 2008 by Ryan Holmes. The user’s interface takes the form of a dashbord, and it supports social networking integrations for Twitter, Facebook, LinkeIn, Google+, MySpace, WordPress, etc.
HootSuite has over 500 staff located in many countries, among which are Vancouver, San Francisco, New Yourk and London. It also has over 9 million users in more than 175 countries.
From software to hardware
Silicon Valley’s investors are also looking to invest in something else than software. They’ve recently offered a new $20 million fund aimed at hardware startups. Daniel Terdiman speaks in his post about Lemnos Lab, which is an early stage VC firm. 3 of its portofolio companies have already reached Series A funding. Its new fund will be for hardware companies, and says Terdiman: “esspecially those developing products in the aerospace, robotics, connected devices, transportation, and agriculture fields.”
Lemnos Labs runs an incubator in San Francisco. There, it provides its companies with office space, equipment, and access both to other hardware startups and frequent industry visitors.
Other hardware incubators mentioned by Terdiman are Level 2 and HAXLR8R. However, Lemnos aims for building a community out of its portfolio companies. Among Lemnos’ companies are Airware, 6Sensor Labs, and Compology.
VC tech investors
So, one of the Venture Capitalist tech investors is Lemnos Labs. I’ll just give you some more examples:
- Accel Partners . It invests early stage/mid stage. Its focus is technology: infrastructure, internet and consumer services, mobile, software and cloud-enabled services. Total Capital: $8.8 billion. Notable investments made: Facebook, Groupon, Dropbox, Spotify, Rovio, Etsy, Baidus.
- Benchmark Capital. It invests in early stage startups. Its focus is Enterprise Software & Services, Communications & Security, Mobile Computing, Consumer Services and Financial Services. Total Capital: $3.6 billion. Notable investments made: Twitter, Ariba, Juniper Networks, Red Hat, Tropos Networks
- General Catalyst. It is also early stage. It’s focus is Technology, Clean Energy, New Media, Software. Total Capital: $1.6 billion. Notable investments made: Hubspot, Kayak.com, Boxee, demandware, ARC Energy, Brightcove
- IDG Ventures. Also an early stage investor. Its focus is Information Technology, New Media, Healthcare. Total Capital: $6.8 billion. Notable Investments made: Simply Hired, Leap Commerce, Infoseek, NetScape, Virtual Ink.
If you want to take a look at Top 10 Venture Capitalist video made by Forbes, be my guest:
So, if you think of building a startup and your focus is technology, you now have a clear picture on what VCs are interested in. What do you plan to do to attract the attention of a Venture Capitalist?
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