Amid the tumult in the public markets, venture capital investments in U.S. startups remains very, very strong -- climbing to a six-year high of $29.4 billion in 2007. It was the busiest venture capital investing year since 2001, with investment spread across 3813 deals, and 11% more money invested than in 2006.
Perhaps most encouragingly, both the venture and individual investor forecasts for 2008 early-stage investments are robust - in spite of and perhaps even driven by public market equity and debt investment uncertainty.This robust outlook is confirmed by the amount of new investment capital that venture capitalists raised in 2007 - $34.7 billion -- 9 percent more than in 2006.
Key market arenas spurring this optimistic outlook include health care and biotechnology, Internet-based business models, and alternative energy. These three sectors accounted for more than 55.1% of 2007 VC investment -- with positive and recession-resistant outlooks for these sectors in 2008.
Growthink's long-term view regarding the early-stage private company investment market remains strongly bullish. Long-term investment return data supports our view that early, or seed stage, private equity investing will always, over the long-term, out-perform all other classes of investment. According to Thomson Financial's US Private Equity Performance Index, 20-year early/seed stage private equity investment has averaged over 20.6%/year in investment return - easily out-performing investment classes including later-stage private equity and public market indices.
Our more prescient short term guidance -- avoid listening to the chattering classes with their "it bleeds it leads" mindset to stoke fear and crisis. The capitalist system that has and will continue to create prosperity to the world is led and driven by entrepreneurs and managers with the resiliency and foresight to act while others dawdle and fret. The great ones are acting now. What will you do?