Venture Capital Survey 2001
By Region

Copyright 2001 by Profit Dynamics Inc., Dee Power and Brian Hill

For the first time we have regionalized the results of the 2001 venture capital survey. Regions included East Coast, South, Midwest, Southwest and West Coast. 400 active venture capital firms across the United States were surveyed by e-mail in September and October 2001, 80 or 20% of the firms responded and completed the survey. The firms that responded were located in 23 different states, 33% located on the East Coast, 27% on West Coast, 16% in the Southwest including Texas, 14% in the Midwest, and 10% in the South.

Dee and Brian are the authors of Inside Secrets To Venture Capital $34.95, John Wiley & Sons, 2001, a result of three years of surveying more than 250 venture capital firms. The book includes interviews with venture capital firms and entrepreneurs who have been successful in obtaining venture capital, as well as hundreds of tips from the venture capitalists themselves on business plans, valuation, due diligence, negotiation, what pitfalls to avoid, and how to get their attention. Read the reviews or the first chapter, table of contents, and back cover. You can even see our photos.

Venture capitalists were asked the following questions and then asked to rate their response from 1 to 5, 1 being much worse, 5 being much improved. The responses were then segmented by geographic region.

SURVEY QUESTION:
Compared to 12 months ago, has the environment for entrepreneurs looking for investors improved or become worse?

The average overall response for all venture capital firms was 1.9. The East Coast had the most pessimistic response, followed by the South and West Coast. The Southwest had the most optimistic response. All regions however rated the current environment worse than 12 months ago.

SURVEY QUESTION:
Have valuations of start-up companies become more realistic in the past 12 months?

Overwhelmingly VCs thought that valuations had become more realistic. The South thought there had been the least improvement, followed by the East Coast. The West Coast VCs saw the most improvement.

SURVEY QUESTION:
Has the quality of the companies looking for capital improved over the last 12 months.

All regions thought that the quality had improved. The East Coast venture capitalists saw the least improvement, followed by the South. The West Coast venture capitalists gave the highest rating for improvement.

SURVEY QUESTION:
Compared to 12 months ago, has the number of companies that contact you for funding increased or decreased?

Nationally the activity levels had dropped a bit from the previous 12 months resulting in an overall rating of 2.8, (3 no change). The South saw the greatest decrease followed by the Midwest. VCs in the Southwest said activity had stayed about the same and the venture capitalists on the West Coast said the activity had slightly increased from over a year ago.

SURVEY QUESTION:
Do you believe the level of venture capital invested in early stage companies will increase or decrease in the next 12 months?

The outlook overall, is that future funding levels will be below current levels for early stage companies. The East Coast VCs rate the outlook as definitely worse by nearly a full point below the average rating of 2.8. The South, Southwest and West Coast are not as pessimistic and believe funding levels will be below current levels but not by a lot. The Midwest is the most optimistic believing future investing in early stage companies will be almost at current levels.

SUMMARY

Profit Dynamics Inc., Dee Power and Brian E. Hill can be reached at P. O. Box 18460, Fountain Hills, AZ 85268, phone (480) 837-9590, E-mail: business@capital-connection.com