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Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

October 28, 2008 at 6:00 PM

WTIA’s harsh venture survey: Lower valuations, fewer jobs, no exits

There’s not much to look forward to in the fourth quarter, judging from the latest venture capital survey done by the Washington Technology Industry Association.

Highlights from the survey, of Q4 expectations, from today’s release:

— For the first time, venture capitalists told WTIA they expect a decrease in hiring: 75 percent of respondents expect no growth in hiring of Washington state workers for the fourth quarter, with just 13 percent expecting an increase in hiring. This contrasts sharply with projections for Q3, in which 57 percent projected hiring increases and 29 percent expected steady employment levels. Despite the overall hiring slowdown, however, attracting senior level talent remains a top concern for portfolio companies.

— 76 percent of VCs see national business conditions as one of the top challenges facing their portfolio companies, up significantly from the 43 percent who felt so in Q3.

— A third of respondents expect revenue growth for their portfolio companies to be moderately or substantially lower in Q4 compared to just 14 percent in Q3.

— Respondents predict moderately to substantially lower deal valuations for early, mid and late-stage companies in Q4. The sharpest change is in the outlook for mid-stage company valuations. In Q3, just 14 percent of respondents expected mid-stage company valuations to go down. In Q4, that number jumps to 88 percent. Similarly, 88 percent of respondents expect smaller valuations for late-stage companies in Q4 compared to 33 percent in Q3.

— While no VCs predicted that new deal flow would be up in Q3, 38 percent expect a moderate increase in Q4. However, the confidence of VCs regarding the deal flow that will actually close in Q4 fell, with 38 percent of respondents expecting moderately or substantially fewer deals to close compared with just 29 percent who predicted a decline in Q3.

— No exits are expected in Q4.

(On the brighter side, Vancouver, B.C.-based Yaletown Venture Partners announced today that it raised $65 million toward a $100 million fund that will invest in clean tech and IT ventures in Western Canada and the Northwest…)

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