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Consumer confidence of Michigan-based venture capitalists as we move into 2021

In a statement released on January 26, 2021, the Conference Board described the status of the Consumer Confidence Index ®, explaining that, nationally, consumers are feeling relatively good about the current state of the economy. Moreover, they feel more positively in their expectations for the future. Given that our previous research has indicated that the high-tech entrepreneurial ecosystem has weathered the storms wrought by COVID-19 and political tensions better than others, we wondered: How does the consumer confidence of venture capitalists compare to consumer sentiment nationally? Here we present an analysis of data collected in 2021 regarding the investor confidence and behavior in terms of key performance indicators, including investing, portfolio management, limited partner management, fundraising, and returns. These findings provide an understanding of these venture capitalists’ perspectives in terms of both present economic conditions, as well as their forecast for the economic conditions of the future.

Present Situation

With an overall rating of 85% positive, Michigan investors are feeling good about the current economic situation.

Overall, based on their current assessment of business and labor market conditions, venture capitalists in Michigan feel positively about how the economy is impacting their current investing, support of the startup companies with which they work, fundraising efforts, returns they are making on investments, and relationships with their limited partners.

Current Assessment – Investor Confidence and Behavior
  • Venture capitalists reported feeling most positively about how the economy is impacting their returns (86%), work with their portfolio companies (82%), and relationships with limited partners (82%).
  • 23% felt their fundraising efforts during this economic climate were about the same as they have been in prior years.
  • Venture capitalists reported the most negativity regarding the economic climate’s impact on investing and fundraising, as some venture capital firms do feel the current economy overall is having a negative effect on their firms in these areas.
  • 64% of investors say their investment process has not changed since the pandemic started in March 2020. Investors that have changed their investment process since the start of the pandemic cited such reasons for doing so as broadening their geographic focus due to virtual meetings being a viable for finding opportunities, placing a great emphasis on digital technologies, trying to become more efficient, and feeling the need to be more cautious due to it being more difficult to perform due diligence or feeling uncertainty about the future.

Chris Rizik is the CEO of Renaissance Venture Capital, a venture capital fund of funds that drives the growth of regional venture capital investment, while serving as a bridge between emerging innovation communities and a strong industrial and commercial base. Chris spoke with EntryPoint and gave his thoughts on how the current economy is impacting the venture capital industry.  He provided a fascinating look the current state of the economy and the evolving technology and innovation needs of the world during a difficult time in human history.

Chris Rizik, Renaissance Venture Capital – Discussing how the current economy is impacting venture capital

Future Expectations

With an overall rating of 90% positive, Michigan investors are feeling good about where our economy is headed.

Overall, based on their outlook for the future of income, business, and labor market conditions, venture capitalists in Michigan feel positively about how the economy will impact their future investing, support of the startup companies with which they work, fundraising efforts, returns they are making on investments, and relationships with their limited partners.

Outlook for the Future – Investor Confidence and Behavior
  • Venture capitalists reported feeling most positively about how the economy is impacting their returns (86%), work with their portfolio companies (86%) and relationships with limited partners (86%). 
  • 23% feel their fundraising efforts in the future will stay the same as they are now.
  • Venture capitalists reported the most negativity regarding their forecasts for fundraising, as some venture capital firms feel the economy overall will continue to have a negative effect on their firms. 
  • Not surprisingly, venture capitalists feel their relationships with their portfolio companies and limited partners will improve slightly in the future. It also seems that venture capitalists feel slightly more positively overall about their firms’ investment activity in the future.

Sonali Vijayavargiya is the Founder and Managing Partner of Augment Ventures, a venture capital firm that invests in transformational companies, commercializing disruptive technologies that enhance the quality of life and business efficiency across global markets. Sonali spoke with EntryPoint earlier this month and gave her thoughts on how the economy will impact the venture capital industry in the future.  She provided detailed insight into the future economy’s potential impact on venture capital fundraising, returns, and valuations.

Sonali Vijayavargiya, Augment Ventures – Discussing the future of venture capital

Startup Company Performance

On average, venture capital professionals feel that just over half of their portfolio companies are doing better today than they were doing on January 1, 2020. Additionally, these investors feel 30% of their portfolio companies are performing about the same as the beginning of 2020 and only 16% are performing worse.

95% of venture capitalists feel that, overall, the high-tech entrepreneurial ecosystem in Michigan is performing the same or better than it was prior to the pandemic.

Lisa McLaughlin is the Co-CEO & Co-Founder of Workit Health, a rapidly growing company that provides online, on-demand evidence-based treatment for addiction. Lisa spoke with EntryPoint earlier this month and gave her thoughts on how the economy is impacting startup companies.  She provided remarkable insight into company performance during the pandemic, industry trends and opportunities for women-led startups.  

Lisa McLaughlin, Workit Health – Discussing how the economy is impacting startups

Conclusion

After considering this data on investor confidence and behavior, it is clear that the venture capitalists are pleased with their current operations, as well as their forecasts for the future. Indeed, while some venture capitalists have reported concerns about the current and future states of fundraising for their firms, they have reported a significant degree of satisfaction in terms of other key performance indicators, including returns, portfolio management, and limited partner management. Although the economic climate has been tumultuous for many in the past year, venture capitalists sustain a sunny outlook.

EntryPoint’s research insights into the pandemic’s impact on the entrepreneurial ecosystem and opportunities for growth has consistently shown the resilience of the Michigan startup and small business economy. This information is valuable because it not only informs decision making of those who support the startup and small business community, it points to investor confidence in the region’s capacity to grow and thrive in the immediate future.

At EntryPoint, we LOVE working with economic development organizations and nonprofits that are strategic, value listening to the needs of community members, and are passionate about building more opportunity and vibrancy in their communities. 

EntryPoint is a registered 501(c)(3).

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