Survey Says: Upswing in VC Investing in New Year

A majority of venture capitalists and entrepreneurs see an upswing in venture investing next year along with a better environment for technology IPOs and acquisitions.

But VCs are cautious about their ability to raise new funds and about cleantech in general, according to a survey released Tuesday by the National Venture Capital Association and Dow Jones.

The fifth annual survey conducted by the NVCA drew  responses from 330 U.S. venture capitalists and 180 startup CEOs, offering a comprehensive look at an industry still fighting its way back to health.

Most notable is the rising interest in technology investing and the potential for startup exits. Large majorities of VCs and entrepreneurs expect an upswing in technology M&A, and 72% of VCs anticipate technology IPOs to increase in volume.

What also seems clear is that fears of a cleantech bubble have largely passed. Forty percent of VCs surveyed expect a decrease in energy investing, while 38% see an increase.

Below are the key results from the study:

* Fifty-one percent of VCs believe venture investing will increase in 2011. Even more startups CEOs, 58%, concur. Roughly a quarter of venture investors believe it will fall.

* Seventy-two percent of VCs expect the volume of technology IPOs to rise. Only about a third see cleantech and life sciences IPOs rising.

* Eighty-one percent of startup CEOs expect the volume of venture-backed acquisitions to increase, while 82% of VCs agree. VCs are particularly upbeat about technology acquisitions.

* About one-third of VCs expect to see an increase in total fund-raising dollars, while one-third expects to see a decrease. About three quarters of VCs believe LPs still hold the advantage in fund-raising negotiations.

* Top industries that are expected to see an increase in investment dollars include consumer Internet (82% of VCs anticipate an increase), cloud software (80% of VCs), and health care (77% %). The results show a renewal of IT investing at the expense of cleantech and health care.

* No clear consensus exists for whether medical devices and biopharma will see increases or decreases.

* Asked which industries will see investment froth, VCs pointed to consumer Internet (69% of VCs) and cloud software (47%). Only 29% of VCs singled out mobile telecom and 28% pointed to cleantech.

* Sixty-one percent of entrepreneurs believe terms sheets will be more favorable to VCs. However, both entrepreneurs and VCs expect valuations to go up (77% of entrepreneurs and 50% of VCs anticipate this).

All in all, the survey suggests further recovery in 2011, which could make raising a venture fund a more rewarding experience in 2012.