Foley & Lardner Survey Finds Investors Strongly Prefer Established Organizations

Boston-Today’s emerging companies are experiencing a Catch-22, according
to respondents of a national survey conducted by Foley & Lardner LLP.
While the market remains flush with available capital, investors have
increased their preference for established, proven organizations.



The survey, measuring the attitudes and perspectives of top executives,
advisors, outside consultants and investors in the emerging technology
industry, found that a lowered risk threshold among investors today
creates a difficult situation for entrepreneurs. Although a large number
of investors (41 percent) have raised capital within the past year and
even more (71 percent) expect to do it again in the next one to two years,
nearly 50 percent of emerging company executives surveyed believe it is
more difficult to start a company today than it was a decade ago.


Further, a majority of respondents (62 percent) believe that emerging
companies need to be prepared to survive on less capital today than they
did a decade ago.


“While the markets continue to be flush with capital, executives of
emerging companies have yet to benefit from an increased appetite for
investment among private equity and venture capital firms,” said Gabor
Garai, chair of the firm’s Private Equity and Venture Capital Practice.
“While investors have told us that they are aggressively looking for ways
to put their available capital to work, emerging companies have yet to see
the fruits of this eagerness.”



The survey also found that emerging company executives are experiencing a
continued “layover” from the burst of the tech bubble, which has
lengthened their exit timeline. A large percentage (60 percent) of
respondents said they are at least three or more years away from a planned
exit. Thus, emerging company executives need to be prepared to invest the
necessary time to develop their organizations and establish a track record
before they can reap the benefits of private equity and venture capital
investment.



Although a significant number of respondents (26 percent) predict a
“robust” IPO market over the next two years, 75 percent predict a
“stagnant” or “declining” IPO market. In contrast, an overwhelming
majority of respondents (80 percent) predict a “robust” M&A market over
the next two years.



“Emerging companies are not yet comfortable relying on IPOs as a
planned exit strategy and see much more potential in the M&A market,”
explained Garai.



Visit www.foley.com/emergingtech for a full analysis of the survey and its
results.