Venture Capital Outlook

TRENDS WATCH

EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.

This week, Elana talks David Lee, Managing Director, Laconia Venture Asset Management/Laconia Capital Group.

What is your outlook for venture capital?

Long-term, I am very optimistic about the outlook for venture capital (VC). Short-term, the VC industry may have some ups and downs and there is definitely some chance we are headed for some near-term bumps in the road given the long bull market, relatively high valuations and abundance of capital. But realistically, VC should be evaluated over 10 to 20 year rolling cycles. If you look back over the last 20 years, we had the dot-com crash in 2000 and the financial crisis in 2008, and yet the long-term returns for VC are still quite strong. In addition, start-ups are taking longer to go public or get sold. For example, Survey Monkey recently went public 19 years after founding. So if you have the right time perspective, VC is a wonderful place to be.

Moreover, the U.S. and the now the rest of world is always looking to start new technologies, ideas and companies to meet needs in the economy. I don’t see that stopping at all which is positive for VC. Finally, we are seeing the maturation of start-up ecosystems outside of Silicon Valley as other cities/locales such as New York City, Chicago and Los Angeles have successfully seen exits of VC-backed companies, which is spanning more angel and early-stage investing while also seeing service providers (lawyers, accountants, consultants, landlords) adapt to the start-up culture. Consequently, I only see positive long-term trends for VC.

What is your outlook for the economy?

I would best summarize my outlook as one that is hoping for the best and preparing for the worst. Unemployment remains low and interest rates are still low on a historical level. The growth of emerging markets like China and India provide additional support for the overall economy. And as noted earlier, innovation continues to develop and be a driver of the economy. However, the U.S. political climate where we now have a divided Congress, the continued specter of more tariffs and international trade wars, and the recent stock market correction worldwide give me pause for worry.

What keeps you up at night?

The biggest thing that keeps me up at night is my sense that civil discourse between two opposing/differing viewpoints is diminishing. It appears most prevalent in today’s political environment where compromise and good of the country of the whole seems to have given way to intransigent positions and party politics. However, you also see it more and more on social media and traditional media where people seem to have no governor or fear of anything they say or do. My concern is that unless this trend subsides, society will become increasingly polarized and it will be almost impossible to accomplish anything economically, socially or politically.