Startup Outlook from Silicon Valley Bank


On Friday Silicon Valley Bank released a survey of 375 executives at startup technology companies in the 4 core venture capital investment sectors – Software/Internet, Hardware, Life Science, and Cleantech. Here is what they found:

Tech. Execs. Are Bullish. Two of three of them say that business conditions are better than they were last year, and three out of four expect things to get even better in the next 12 months.  And listen up Washington - 83 percent of them plan to hire in the coming year. Hooray!

And They Believe as I do, that America’s Decline has Been Greatly Exaggerated.  More than three in four of them see America as still the world innovation leader and the BEST place to start and grow a business. 

In fact, the main competitive advantage that these startup executives see for doing business overseas is cost.  On every other measure – quality of employees, the quality of the higher education system, and overall entrepreneurial mindset and culture, among others - the U.S. still comes out on top.

Money Still Makes the World Go Around. The top challenge listed across all respondents was access to financing. While things certainly are improving, these executives rightly believe that the amount of dollars flowing into emerging companies is still way too low. 

The study notes that in 2010, venture capitalists invested $21.8 billion in 3,277 deals, and while this is certainly up from the death spiral period of the 2008-2009 period, it is still much less than the $30 billion average that venture funds were investing annually through most of the past decade.

And Government Just Gets in the Way.   Next to money - and the related challenge of scaling operations for growth - the #1 challenge that startup executives point to is the regulatory / political environment. 

Healthcare company executives in particular expressed deep regulatory exasperation:

“The FDA is by its very design killing innovation and entrepreneurship. Its very charter utterly excludes the notion of fostering development, opting instead for a one-way ratchet that can only lead to longer, more costly development cycles with no improvement in real safety for efficacy.”

“Our outlook is solely dependent on the FDA. We are doing well in Europe, but the processes for the U.S. FDA simply is broken and harming innovation.”

“I am 40 years in this business, and see an FDA approval pathway that will destroy our business, for no reason. I see futile attempts on our company’s part to obtain Chinese monetary support, while we give away our technology.”

In Sum, Startups Still Make the American Business World Go Round.  As its executive summary notes, “High growth small business startups are the principal driver of net new job creation…they are responsible for creating entire new industries — from IT and semiconductors, to biotechnology, to online retailing, social media and cloud computing…”

“They improve our quality of life, by expanding access to information, providing higher quality goods and services, improving health care quality and access, and fostering a more sustainable environment and U.S. energy independence.”

I don’t think any of us could have said it better - the entire survey can and should be read here

Secrets of Startup Investing

We just updated our white paper "Secrets of Startup Investing: Where to Win Now."

It provides tips and advice for those looking to invest in startups and emerging companies, including:

•    How to Build Portfolios of Positions Efficiently and Rapidly
•    How to Dispassionately Assess Risk
•    How to Understand Private Equity Valuations and Exit Potential
•    And much, much more!!

To download this complimentary report, please click here.

To your success,

Jay Turo

Share this article:

Get a Free Consultation
with a Growthink Expert

Click Here