VC sector optimistic for 2011, especially in IT

Venture capitalists expect greater investment next year, while CEOs of VC-backed firms are looking at more work and more hiring, according to a report (PDF) released today by the National Venture Capital Association (NVCA) and Dow Jones VentureSource.

Among the venture capitalists polled for the "2011 Venture View" survey, just over half (51 percent) are looking for investment to pick up next year. Only 24 percent expect it to stay level, while the same percentage believe it will decline. CEOs running venture-backed companies were also optimistic, with 58 percent eyeing an increase in venture investing next year and 64 percent planning to turn to VCs themselves to raise more financing.

Looking further at their own businesses next year, 82 percent of the CEOs polled expect to add staff, 50 percent are likely to improve compensation packages, and 60 percent are looking at higher sales from overseas markets.

Focusing on specific sectors, investment in information technology (IT) is expected to increase more than in the life sciences and clean tech areas, according to VCs, a reversal from the past few years. Three hot areas of IT will be consumer Internet and digital media media; cloud computing; and mobile/telecom. However, consumer Internet/digial media and cloud computing may actually see some "froth," or overinvestment, from venture capitalists.

When asked whether fundraising will grow, decline, or stay the same in 2011, venture capitalists were split pretty evenly across the board. But many of them see more investment coming from limited partners.

Finally, a healthy number of VCs (63 percent) and CEOs (64 percent) expect the overall U.S. economy to improve next year, prompting corporations to spend more on technology, add staff, and improve their compensation packages.

"The market was so troubled in 2009, the sentiment was that things had to get better in 2010," NVCA president Mark Heesen said in a statement. "It turns out our predictions were correct and in the past year we have moved beyond the financial crisis and returned to doing what we do best--building great companies...While the venture industry will continue to evolve, and likely contract, the companies we fund will continue to grow, innovate, and drive the U.S. economy."

The survey polled 330 venture capitalists in the U.S. and 180 CEOs of U.S.-based venture-backed companies between November 29 and December 10.