Despite last year's full-throated thirst for tech-company investments, this year could be downright ho-hum, possibly taking the wind out of the sails of those who suggest we're in bubble territory.
The latest survey of technology executives for Silicon Valley Bank reports some increasing uncertainty in the year ahead, even as businesses broaden their base of capital funding. While the percentage of entrepreneurs receiving venture capital dropped in 2014, more expect to find financing from banks, angel investors and other individual investors. Crowdsourcing is likely to remain an outlier, accounting for only a fraction of funding.
"Capital is available, but that doesn't mean it's easy to come by," the report says.
In January, Silicon Valley Bank surveyed 1,100 executives of small companies, primarily in the U.S. Ninety-three percent of the firms were private, and more than three quarters of them were technology firms.
Less than a third of companies surveyed said they expected to receive venture capital for their next round of funding in 2015, down from 43 percent who had forecast getting it for 2014. Fifteen percent said they planned to fuel growth organically from revenue in 2015, up slightly from 2014. And only 8 percent said they expected to get a bank loan this year, roughly half of the percentage that expected a bank loan in 2014.
No wonder, then, that tech entrepreneurs are slightly less optimistic about the year ahead. While 71 percent said they expect business conditions to improve in 2015, that's down a full 10 percentage points from forecasts for 2014.
Still, the spigots of venture capital investing remain open.
Forty-four percent of companies said they received venture capital funding in 2014, down four percentage points from 2013. Also, the percentage of companies that were unable to raise venture capital fell by nearly half, to 7 percent from 13 percent, in 2013.
Certainly, 2014 paid off well for a select few of Silicon Valley's most prominent tech startups, which have seen top dollar investments. Uber, co-founded by Travis Kalanick, reeled in $4 billion in venture capital from Google Ventures, Menlo Park Ventures, and Kleiner Perkins Caufield & Byers and others since last year. Uber is valued at more than $40 billion today. Pinterest, co-founded by Ben Silbermann and valued at $11 billion, took in $567 million from Andreessen Horowitz, Fidelity Investments, and Bessemer Venture Partners in 2014.
Meanwhile, 54 percent of survey respondents said they got financing from individual investors and 15 percent said they tapped bank loans in 2014, two categories that Silicon Valley Bank did not include in its survey of 2013 fundraising. Nearly one third got financing from angel groups, a significant drop from 2013, when nearly 60 percent said they did. (A reporting difference this year, where individual angels were stripped out, may account for the difference, the bank says.) Government grants to companies in key industries, such as health care, also increased, with six percent reporting getting funds for business, double the percentage of 2013. Crowdfunding accounted for just 3 percent of funds raised in 2014, compared to 2 percent the year before.
Some of the reasons for the confidence drop in 2015 include challenges to expanding internationally, seen as a key component for growth, as well as access to the most highly-trained employees, executives in the survey reported.
"While confidence is high, it's measured," the report says. "Leaders recognize that fundraising, access to talent, and global expansion won't be easy."