VCs look to networks, Java for growth
All eyes are on network infrastructure and Java as venture capitalists prepare for more big spending into the new millennium.
According to a findings released today by Arthur Andersen, more than half of the 80 attendees polled at a recent venture capital conference forecast network and infrastructure expansion as the leading technology sector for investment and growth moving into the 21st century.
A strong second was Java; 40 percent of the attendees named the programming language for adding animation and functionality to Web sites as the No. 1 technology driving industry innovations.
"Traditionally, there has been a lot of interest in the high-tech area, including communication, hardware, and software...Now Java and network infrastructure are the exciting new technologies and there is a lot of opportunity," said Mark Heesen, director of legislative and entrepreneurial affairs at the National Venture Capital Association. He added that ten years ago the hottest investments were in hardware, followed by software, but "this is the next step in the computer revolution."
By choosing Java over technologies such as DVD, push, and MMX, entrepreneurs and venture capitalists agreed that the industry is going to be seeing more thoughtful implementations of new technologies that will maximize Java's capabilities. One attendee noted: "No other language has been so widely accepted so quickly across so many platforms."
"Sixty percent of all [venture capital] money is going into information technology," said Heesen. "Money is staying in technology; it's inching up, not taking over. Investors want to keep their investments diversified," Heesen added.
In 1996, venture capital investments in IT companies reached $4.7 billion, up from $3.3 billion in 1995, while all venture capital nationwide topped $9.5 billion, besting the record of $7.5 billion set in the previous year. Three-quarters of this growth is attributed to investments in IT firms, according to Price Waterhouse. In addition, the results of the Andersen survey suggest that the investment and entrepreneurial communities have a sanguine outlook for the continued growth of venture financing. In fact, 80 percent of the attendees polled predicted a substantial increase--in the $10 billion to $50 billion range--in the amount of venture capital available over the next five years.
However, Price Waterhouse does not expect the growth to be so dramatic. It said that venture capital investments may reach a plateau this year.
"We'll continue to see increased interest in the Internet and Java, with more interest in [the rest of] 1997 and going into next year," Heesen said. Beyond that, it is difficult to make predictions "in light of helter-skelter market." He added that venture capitalists are taking a long-term perspective that is very positive. Yet this outlook still depends on how the IPO market is in 1997 and on the passage of the proposed capital gains tax breaks.