High valuations and competition among venture capital managers are making it harder for them to find better investment opportunities, a new survey from Preqin finds.
In its survey of 221 venture capital fund managers in November, 55% of managers said they found higher pricing for portfolio companies compared to a year earlier, a significant jump from the 32% of respondents in June 2017 who said pricing was higher than the year before. While the rate of increasing competition has decelerated, according to the survey, with 46% of managers saying in November that competition had increased in the past year compared to 49% that said so in June, competition is still a concern among many. Ninety-eight percent of managers in this survey said in November the level of competition was equal to or greater than it had been 12 months ago.
"The venture capital industry has seen incredible success over the past year, with 2017 marking a banner year for fundraising and deal activity," said Felice Egidio, Preqin's head of venture capital products, in a news release announcing the survey results, "However, as the market becomes more crowded, fund managers are increasingly concerned over asset pricing and rising competition for transactions, a trend that has been reported across the whole private equity industry."
Twenty-seven percent of managers in the current survey said sourcing opportunities was more difficult than it had been 12 months previously, compared to 11% that said it was easier. Sixty-two percent said there was no difference in the market. In the June survey, only 15% said it was more difficult, with the same number saying it was easier.
The survey, Venture Capital Fund Manager Outlook, is available on Preqin's website.