Last year brought many changes to the state of venture capital around the world. The fact is that fewer deals were actually made. The interesting part, however, is that the deals were made at a higher cost, showing an increase over that of 2013. That growth has continued in 2015, mainly in terms of tech companies. The market hasn’t come close to being saturated with new, inventive ways to save time, save money or enhance social media usage as we know it. These areas still show promise worldwide for the near future.
The Benefits of Venture Capital Deals
The benefit of venture capital is the ability to help start-ups grow their businesses before they can reach out to the public. Being publicly traded certainly expands the horizons of a growing company, but that isn’t possible during the planning phases of the business. Venture capital is usually acquired during the early stages of the business so they can afford to hire new help, develop ideas, create prototypes, manufacture products, and more. There is typically a huge return for investors, making it a sound deal for everyone involved.
In addition to the financial backing, venture capital deals offer the opportunity for well-establish companies and entrepreneurs to provide advice, mentoring and stability for newly developed companies that cannot match their level of experience or longevity.
More start-ups and projects in the early stages means more choices for investors, but it makes it that much harder to make a smart investment. Giving money to a start-up doesn’t always means supporting a young, hungry entrepreneur though. Sometimes the smart choice is the veteran CEO’s who have seen the rise and fall of businesses and have a better grasp on what it takes to succeed in this ever changing market,
The Focus of Venture Capitalists
As the market for venture capital deals grows worldwide, the focus of 80 percent of funding goes to a select group of businesses. They businesses involve or provide medical devices, IT services, software, biotechnology, hot new products or entertainment. Start-ups in any of these categories have a greater chance of obtaining funding in the early stages of their development than those that don’t fit these categories.
Technology Is an Essential Component for the Future of Venture Investments
Technology is the way of the future and venture capitalists are taking advantage of the opportunities to change the way non-technology related companies work. In other words, there will be an app for every kind of business across the board. Companies that have previously had no need for or connection to technology will soon feel the pressure to be mobile and social media friendly.
The Global Trends for Venture Capital
Counties in Asia, China in particular, are leading the way in venture capital investments in terms of the overseas market. Government involvement is a key reason for the unprecedented growth in China. The Chinese government supports green energy and high tech companies and seeks to support innovation brought about through start-ups. Earlier this year they approved a special fund to help back start-ups.
China isn’t the only country showing gains in venture capital, however. India and Israel have also seen remarkable growth in investments. On the contrary, Europe and Canada have the least amount of growth in this area. One thing we will see more of is investors from around the world putting money into U.S. companies due to the strengthening economy.
The Immediate Future of Venture Capital Investments
As we progress through 2015, there are a few things which can affect the immediate future of investments for start-up businesses. Falling energy prices is one thing to watch for. The prices in Europe being less than in the U.S. is another. Lastly, the growing number of overpriced items on the market could turn away some investors. The competition for high paying investments can easily become fierce as fewer deals are made at higher prices.
To combat these potential game-changes, investors are adapting to remain competitive. They are turning to hedge funds and other sources of unconventional lenders rather than turning to banks or traditional lenders in an effort to save money on fees.
In essence, the outlook for the remainder of 2015 and beyond is strong in terms of venture investments. While the U.S. remains a strong player, several other countries are equally invested in the growth of young companies with innovative ideas.