2017 is going to be an exciting time for venture capital firms, based on the patterns for financing activity in the past years and the continued public interest in the private equity market in general.
This article lists the trends and predictions for this domain for this year.
Decreased funding. In an article published by Venture Beat, Ernst & Young’s venture capital (VC) chief Jeffrey Grabow predicted that funding by VCs will continue to decline, as it had from 2015 to 2016. He explains the phenomenon in the same article: The world has yet to see the impact of the scores of billions of capital that have since been deployed, and so it is time for the market to absorb these investments. Venture capitalists will then be more on observation mode, looking at the actual market performance of VC-backed endeavors rather than actively searching for new enterprises or ideas to fund.
Fewer mergers and acquisitions. Related to the first point, there may be fewer mergers and acquisitions this year, which entail huge investment of resources. Many acquisitions, for example, require complete overhaul of the organization’s infrastructure, as well as the conduct of rigorous improvements and procurement of tools and recruitment of talent. Because of this, 2017 will instead be marked more by buyers standing by to wait for the proverbial unicorns, and will tend to be very selective when it comes to opting to acquire startups and small enterprises.
Growing interest in artificial intelligence (AI) innovations. Startups based on artificial intelligence innovations are likely to draw the most interest among venture capitalists. In Silicon Valley, Venture Beat reports that leading VCs in the tech industry are on the lookout for AI-based innovations that they can support, which are also linked to many other products that will emerge in other industries, such as retail, financial services, and healthcare.
Greater reliance on outsourced services. With the amount of work needed to ensure the continued good performance of acquisitions, venture capital firms need all the help they can get especially in maintaining their day-to-day operations. The assistance offered by asset servicing firms comes in handy, particularly in the area of middle and back office. More third party providers are now being tapped to handle such tasks as accounting, tax reporting, data management, risk management, fund administration, and compliance management – functions made easier to accomplish with better tools, well-trained staff, and access to expertise.
