VCs more risk averse as recession bites: survey

June 10, 2009

calculatorIt’s no secret that venture capital firms are tightening their belts in order to weather the current economic downturn, but a new survey depicts a larger realignment at work in the industry.

This year’s Global Venture Capital Survey, a joint report produced by Deloitte and national venture capital associations around the world, shows that in addition to reducing their overall investments during the past year, VC firms have also shifted their efforts to focus on later-stage investments.

According to the report, more VCs may be avoiding early-stage investments because acquisitions now take longer to finalize and IPOs are few and far between in the current economic climate. This means it can be tough for VC firms to plot a quick exit strategy.

In addition, the survey found that more VC firms around the globe are investing abroad. Of the survey’s 725 respondents, more than 50 percent said they have investments outside their home countries. While such a trend has been afoot for some time now, the survey shows the recession hasn’t put a damper on the globalization of the industry.

For more details, see the full report below.

(Photo credit: REUTERS/Yuriko Nakao)
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This is typical behavior for the VC community — to focus on later stage deals when the economy goes south. Yet, the irony is that VCs are supposed to finance innovation. If there is any time to invest, how about when valuations are low and there are many smart entrepreneurs who need just a little bit of capital?