Venture Capitalists Expect IPO Drought to Ease in 2010; Greentech Offerings to Lead...

Venture Capitalists Expect IPO Drought to Ease in 2010; Greentech Offerings to
Lead Market Interest, KPMG Study Finds
Greentech, digital entertainment and mobile to see most investment dollars in
2009, and Brazil, Russia and Israel gain momentum as attractive investment
regions over next five years

NEW YORK, July 22 /PRNewswire/ -- Venture capitalists don't expect to see
a consistent flow of IPOs again until 2010 and report that their firms, as a
result of the slumping US economy and unstable markets, have extended exit
timelines by 12 months or more, according to a recent survey by the U.S.
audit, tax and advisory firm KPMG LLP.
In polling 297 venture capitalists, corporate buyers, bankers and
entrepreneurs, KPMG found that 79 percent of respondents expect a strong
stream of IPO activity to begin in 2010. Forty percent expect a turnaround in
2010, 24 percent in 2011 and 15 percent in 2012. Interestingly, only nine
percent think activity will pick up in 2009. And 12 percent don't think
future IPO activity will ever reach historic annual average levels again.
When asked which industry will be on the front end of the IPO turnaround,
greentech was the runaway favorite with 44 percent of the responses, while
mobile and the digital entertainment sectors garnered 16 percent and 13
percent of the responses, respectively. KPMG conducted the survey in
collaboration with AlwaysOn, the venture capital new media organization.
"There is no question that economic and market conditions have dealt the
IPO market a blow," said Packy Kelly, KPMG partner based in Silicon Valley and
co-leader of its venture capital practice. "These conditions have led
investment firms to hold positions longer, but will not hinder their appetites
to continue to invest in attractive sectors, such as greentech and mobile, as
they anticipate a more attractive IPO market for these companies in the near
future."
When asked how the slumping economy and unstable market have affected exit
timelines, 67 percent of respondents said their timeline has been extended by
more than 12 months, while 19 percent indicated a delay of six to 12 months.
Where is the VC money going?
When asked to identify the industries that would receive the most venture
funding in 2009, 27 percent indicated greentech, which was followed by digital
entertainment at 23 percent, mobile at 20 percent, and life sciences at 16
percent. In fact, with regard to greentech investment specifically, 70
percent of respondents said they expect an increase of 10 percent or more in
2009. With the steep increases in energy prices, it may come as no surprise
that the sectors expected to see the most funding in 2009, according to KPMG
survey respondents, are: alternative fuels (39 percent), solar power (22
percent), clean automobiles (14 percent) and wind power (11 percent).
The digital entertainment industry will also remain an attractive
investment opportunity for venture capitalists in 2009, and 43 percent of
respondents expect the bulk of the funding to go toward the mobile
applications sector, followed by social media at 25 percent and content
development at 20 percent.
Venture capitalists also indicated that they expect to see an increase in
sector and geography-specific venture funds next year, similar to those
recently launched by numerous VC firms that focus on greentech, mobile and
China. In fact, 55 percent of respondents indicated that they expect the
number of niche funds to increase by 15 percent or more in 2009.
In addition to China and India, the KPMG study also found that investors
expect other emerging markets to become attractive venture capital investment
opportunities over the coming years. In fact, 41 percent of respondents
indicated that beyond China and India, Brazil will be the most attractive
market five years from now. Russia (19 percent), Israel (14 percent) and Qatar
(9 percent) are also expected to be attractive investment geographies for
venture capitalists five years from now.
"There is a clear indication that growth investors have become more
global, spreading their capital worldwide," said Brian Hughes, KPMG partner
based in Philadelphia and co-leader of its venture capital practice. "Not
surprisingly, they continue to be bullish on emerging markets and industry
sectors that project the most growth in the near future."
KPMG LLP, the audit, tax and advisory firm (www.us.kpmg.com), is the U.S.
member firm of KPMG International. KPMG International's member firms have
123,000 professionals, including more than 7,100 partners, in 145 countries.
Contact: Manuel Goncalves
KPMG LLP
Tel: (201) 307-7735
mdgoncalves@kpmg.com

SOURCE KPMG LLP

Manuel Goncalves of KPMG LLP, +1-201-307-7735, mdgoncalves@kpmg.com