Outlook & Predictions for 2014

As the year winds down, I’ve been thinking a lot about 2014.  There are several trends I’m watching that should have profound impact on the venture capital landscape, in particular the growth stage (ie, Series B and Series C).  These dynamics will also impact the IPO market. I’ll be writing about these trends in greater detail in ‘14:

(1) Here Comes China

  • Big, powerful Chinese technology companies are not only spending more time in the United States, but also staffing-up here.

  • These companies include the three big Chinese Internet companies (Tencent, Alibaba, Baidu), as well as the next most important players (Xiaomi and Qihoo).

  • These companies will be very active investing in and acquiring (mostly mobile) startups in the US in 2014.

  • The China influx will impact the venture capital business, M&A, and IPO scenes.  These companies represent a brand new, well capitalized set of buyers and investors in tech.

(2) Hedge Funds As Tech Investors

  • Hedge funds (and mutual funds) are the newest actors in the pre-IPO investment stage.

  • What began as a trickle of hedge funds in venture this year will increase to a torrent in 2014.

  • Companies now stay private longer — as a result, they’ll seek private rounds to fund growth.

  • Hedge funds are structurally different than venture firms, and founders need to know the differences, which present both opportunities and risks.

(3) A More Serious Shift To The Cloud

  • Incumbent technology vendors face serious headwinds, caused by the rise in public cloud computing options.

  • IT spend will shift even further away from traditional technology capex spend to lower price opex with SaaS and cloud vendors.

  • Losses felt by incumbents are potential gains for startups.

  • Native mobile and cloud companies are surging ahead in this environment, stealing market share and exhibiting very high growth.

(4) A Wide Open IPO Window

  • Native mobile and cloud companies benefiting from the shift described above in #3 will continue to be viewed favorably by public market investors.

  • Expect several successful IPOs from mobile and cloud companies, especially those focused on the enterprise and SMB, in 2014.

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