VC predictions for the New Year

Venture capitalists make predictions about what they expect to happen in 2007.

Foreign affairs

“With opportunities abroad abound, many senior VCs are spending less time in the U.S. and focusing their energies on developing outposts in China, India and Eastern Europe. This, along with the usual ‘call in rich’ VC retirement cycle, will result in a thinning of experienced, company-building GP talent on the home front.”

Jeffrey BussgangGeneral PartnerIDG Ventures Boston

“The China bubble and the cleantech bubble will each inflate even further until they are treacherously vulnerable to the economic hammer of standard investment metrics like EBITDA multiples and PE ratios.”

Todd ChaffeeGeneral PartnerInstitutional Venture Partners

Web 2.0

“Technology will have an even more direct impact on society, creating trends in lifestyle that I believe will quickly go beyond Web 2.0 and YouTube. It will be about the consumer interacting with the technology, and also the technology interacting with the consumer.”

Joseph TzengManaging DirectorCrystal Ventures

Exit this way

“The exit market will remain robust for venture-backed companies that seek non-IPO exits, so look for an active trade sale market and a lot of interest from the over-funded LBO market.”

Charles RothsteinSenior Managing DirectorBeringea

“Revisions to Sarbanes-Oxley, as it relates to small companies, will open the IPO window allowing nearly 100 high-potential, venture-backed, growth companies to go public in 2007, the highest level since the bubble. Without reform, the United States will continue its tragic fall from leadership in public growth equity capital markets. Government regulation is literally snuffing out the fuel that fires our innovation economy.”

David SprengManaging General PartnerCrescendo Ventures

“In 2007 venture capitalists and their companies will continue to struggle accessing public markets for capital. Excessive regulation of both financial analysts and financial reports is, respectively, limiting coverage of young growth companies and curtailing profits.

Bob PaveyManaging PartnerMorgenthaler

“There will be an increase in the type and number of exits in 2007, with acquisitions driving biotech returns. Pharmaceutical companies are under pressure due to shallow pipelines, patent expirations and generic competition.”

Jim HealyManaging DirectorSofinnova Ventures

“The window will open up when the companies reach maturity and three quarters-plus of predictable revenues and profits.”

Robert SimonDirectorAlta Partners

“I predict that 2007 will be the best year for U.S. venture-backed company IPOs since the bubble popped in 2000. But it won’t be as good as it could or should be.”

Dixon DollManaging General PartnerDoll Capital Management

Consumer electronics

“This year, VCs are certain to show increasing interest in consumer electronics and communications convergence. They are also certain to have as many spins on it as there are fish in the sea. This is probably a good thing for the marketplace because it will result in a lot of innovation for the market to choose from.”

Len RandManaging DirectorGranite Ventures

Off the cuff

“Two big predictions for ’07: U.S. Congress will appoint Borat to explore the benefits of SOX 404; and, Kevin Federline will launch K-Fed Capital, a hedge fund focused on turning profitable companies into distressed assets.”

Jim LabeCEO and co-founderTriplePoint Capital

“In response to the flagging U.S. IPO market, the U.S. Congress will pass bi-partisan legislation melding the enthusiasm of “Go IPO” with the disclosure requirements of a S-1 red herring and the oversight of Sarbanes Oxley. President Bush wil then veto the bill when he is told that the secret message contained in it is ‘Go Red Sox.’”

Gerry LangelerManaging PartnerOVP Venture Partners

Bigger deals

“You’ll see more and larger deals. Private equity investors are seeking to unlock the value in businesses that de-levered their balance sheets post-2000 and are now capable of replacing a significant portion of their market capitalization with inexpensive debt.”

Walter KortschakManaging PartnerSummit Partners

Digital media comes back

“Returns from biotech and digital media were disappointments over the last two years. That’s over. Both will lead returns over the next two years.”

Carl EiblManaging DirectorEnterprise Partners Venture Capital

Cleaning up

“In the 07 capital market from clean tech, I think you’re going to see an upswing in new issues.”

Erik StraserGeneral PartnerMohr Davidow Ventures

“Cleantech companies will continue to attract increased attention and investment dollars in 2007 as investors are attracted by the undeniable underlying market trends driving innovation in areas like alternative energy, clean water, and energy efficiency. VCs, debt providers, private equity firms, hedge funds and public investors will have appetite for investment in this sector.”

Bill WibergGeneral PartnerATV

Model talk

“The VC model is most definitely not broken; it is just frayed when investing in sectors which have already attracted far too much capital. By definition we are investing in opportunities which are somewhat over the horizon so we need to do a better job predicting the future.”

Michael GreeleyGeneral PartnerIDG Ventures Boston

Chips ahoy

“2007 will be the year in which the RFID industry enters its hyper-growth phase as new low-cost and high-performance RFID semiconductor chips hit the market.”

Patrick EnnisManaging DirectorARCH Venture Partners