By Tanvi Acharya, Associate Editor for USDR
Driven by a combination of favorable capital markets, abundant investment opportunities and a strong investor climate, U.S. continues to gain investor confidence at a global level according to the 2014 Global Venture Capital Confidence Survey from Deloitte and the National Venture Capital Association.
Moreover, global investor confidence also increased in the United Kingdom, Israel and Canada, but continued to decline in Brazil, China and India, according to the survey.
Conducted in May and June of 2014, the 10th annual survey, gauged confidence levels of more than 300 venture capital, private equity and growth equity investors, assessing investor confidence.
Assessment was based on confidence in the global venture capital environment, market factors shaping industries, and investments in specific geographies and industry sectors.
Confidence levels were measured on a scale of 1 to 5, with a score of 5 representing the most confidence.
Venture capital fundraising has been picking up steam in recent quarters with U.S. venture capital firms having raised $7.4 billion in new commitments from 78 funds during the second quarter of 2014, according to Thomson Reuters and the NVCA.
A 24 percent increase compared to the number of funds raised during the first quarter, marks the strongest quarter for the number of funds raised since the fourth quarter of 2007.
Global investor confidence grows in the U.S., Israel and Canada, but declines in Brazil, India and China
U.S. respondents’ outlook on investing in U.S. opportunities again increased in 2014, scoring an average of 4.17 (up 41 basis points from 2013), according to the survey.
At the same time U.S. confidence in the global capital markets grew, rising from 2.70 in 2013 to 2.99 in 2014.
Emerging markets again continued to decline among global investors. When asked about confidence in investing in a particular country, participants rated Brazil at 3.13, down 42 basis points from 2012, China at 3.27, down 18 basis points from 2012 and India at 3.08, down 16 basis points from 2012.
Cloud computing and mobile remain at the top of investor confidence for the second year in a row
U.S. as well as global venture capital investors named cloud computing as the area they were most confident investing in followed very closely by mobile technology and health care IT and services.
Moreover, U.S. investors exhibited the least confidence in energy/clean technologies and semiconductors while global venture capital investors showed it most for investments in hardware followed by semiconductors.
U.S. confidence in domestic government continues to decline
Across the globe, the U.S. maintained its position as the best country to invest in, rating 4.03, trailed by Israel (3.71), Canada (3.48) and Germany (3.38). However, their domestic confidence in government policy making to benefit investment dropped from a collective 2.17 in 2013 to the lowest among the countries surveyed (2.05).
Continuing the trend from last year’s survey, U.S.-based respondents remained doubtful of government’s ability to enact policies that support domestic venture capital, private equity and growth equity investment in the coming year.
“A global environment where capital flows to companies from creation to growth to exit depends, in part, on government policies that encourage investment in new ideas and provide a clear pathway for innovations to go to market,” said Scott Sandell, general partner of New Enterprise Associates and chairman of NVCA.
Sandell explained the relation between the government and nation’s economic activity, as well as the consequences of not providing a good environment for investing.
“Decreased confidence in government drives capital away from economies, and if more isn’t done to improve the U.S. policymaking process, we could lose our foothold as the preeminent destination for innovation investment,” said Sandell. “The venture capital community will continue to look toward global economies where governments are committed to fostering the growth of innovation.”
Confidence of respondents from 11 other countries in their government’s support ranged from very high to very low, averaging a 3, all of them being higher than the U.S. The highest levels of domestic confidence were shown by India (3.83), China (3.63) and Japan (3.58).