“The tourists have left.” That’s how National Venture Capital Assn. President Mark Heesen describes the pared down U.S. entrepreneurial ecosystem after several years of tough exit markets, low returns, and an abysmal fundraising environment. Further, he expects the fallout from the dot-com bust and its effects on the venture capital community to continue through 2011, as the last of the weak VC players retreat from the industry.
Heesen did have some good news for Michigan’s venture community–the exit market is picking up, with a record number of acquisitions this year and the expectation that that number will climb after the midterm elections. Fundraising should pick up accordingly, as existing LPs start receiving long-awaited checks and become more optimistic about the asset class. He also shared a prediction that our state will become one of the most important state’s in the country if Republicans gain control of the U.S. House of Representatives, as Reps. Fred Upton (R–6th District) and Dave Camp, (R–4th District) are poised to take leadership roles on powerful House committees.
Finally, Heesen touted the importance of regional venture funds as locally sourced deals become a key differentiation point in Silicon Valley. He expects a continued increase in first-time funds and early stage funds, as smaller LPs previously frozen out of the asset class squeeze in. He said the NVCA is carefully monitoring the European directives that will restrict European money invested into U.S. funds and foreign venture investments in European companies, an issue so important its passage could lead to a U.S./Europe trade war.