What will Venture Capital funds invest in 2012
Venture capital funds will have different directions in 2012, as many industries and opportunities had emerged in 2011, as well as increasing globalization and new technologies had been commercialized. Changes in the way we think and also social changes will also bring new opportunities.
Here are some industries we believe will be what venture capital investors are likely to invest in 2012.
2011 was a year of cleantech investments despite of some drawbacks caused by the collapse of Solyndra. Cleantech is now becoming a relatively more mature industry compared to 2010, a lot of technologies have been commercialized and signing up customers.
There are 2 types of opportunities from investors: The emerging technologies particularly for solar and water management opportunities; the private equity funds may also acquire cleantech companies as a base to make acquisitions and merge with other solar companies.
Renewable Energy Projects
Renewable energy projects are also attracting investors, investors include both financial institutions or strategic investors such as oil & gas companies, or utilities companies. Wind energy and solar energy infrastructure projects are regarded as good investments for many investors as technologies are already proven and with much higher acceptance rate by the communities.
Large scale wind farms & solar infrastructure are being planned across the world, and many of these will be commissioned and invested by private equity funds in 2012, including those in emerging markets.
E health is a sector in demand from many investors, mainly due to Government initiatives; as E-health will reduce problems with errors in prescriptions, it also improves file transfer and record management.
E health is also a popular option as it does not involve the medical R&D risks faced by many medical companies. In fact, E-health opportunities are invested both by biotechnology & technology venture capital firms as they regard it as a technology rather than a medical product.
Telecommunications Infrastructure & Services
Introduction of 4G has just started; there will also be opportunities for new infrastructure networks to be rolled out. We expect 4G will create the same impact as when 3G was rolled out. New network operators will emerge, new service providers will emerge and new technologies will also emerge.
Investments will occur at different sectors and opportunities. For established markets like the US, investments will be mainly in applications and new services; whereas for emerging markets, significant investments will be made into network infrastructure and also fixed assets such as Internet Data Centers.
Retail and Franchising Opportunities
When we interviewed venture capital firms, many of them express their interests in investing in retail & franchising opportunities. Some of these opportunities are from family succession opportunities, where VCs or PEs can acquire an existing business that often have regional dominance or loyal customer base.
Franchising is another good example as they are easy to expand and can become a global business relatively easily even into a global business. Franchising also has a good consistent cashflow model (franchising fee), and they are in very high demand from new immigrants as they qualify for business immigration in many destinations.
Professional Services Firms
Once again, this is another example where venture capital firms do not just invest in technology opportunities. In the recent years, many venture capital firms have invested in different types of professional services firms, and is likely to continue in 2012.
The types of professional services firms include environmental engineering firms which is a booming industry due to increasing number of environmental projects, mining services companies which provide analysis or drilling services for different mining companies.
Some venture capital firms have also backed newly created accounting firms or law firms that can be rolled out or franchised, which is quite an interesting business model.
Niche Financial Services Firms
As the credit crunch is almost over, new types of financial services firms have emerged servicing different industry groups. Venture capital investors like financial services companies because of the recurring revenue nature.
Some examples they have mentioned include: specializes fund of funds , exchange traded funds; they also like specialized lenders such as financial companies providing equipment financing for doctors and dentists or those provide advance cashflow to existing businesses over their receivables.
These are just some of the ideas we have gathered from various venture capital funds, more articles will be published about venture capital industries later.