Venture survey forecasts tough life sciences investment scene for 2012

The sixth annual venture survey from the National Venture Capital Association and Dow Jones VentureSource has come out, and it includes a fresh echo of the much bleaker perspective that venture groups have these days. Asked to look into their crystal balls, only 32% of the venture capitalists surveyed said they expected to see investment levels rise next year, while 36% forecast a drop. That compares with a much more bullish CEO perspective, with 45% looking for a jump next year.

Slightly more than half of the CEOs were upbeat about the country's economic prospects next year, with New York getting top marks among the regions, followed by Silicon Valley and New England, where only 25% of the VCs expect an improvement. Most VCs were decidedly bearish about the IPO market for life sciences companies even as 75% of the CEOs said they planned to seek out new investments in 2012.

Half of the VCs say they plan to invest outside the U.S., with China and Western Europe sharing the lead among the most favored destinations. One area that CEOs and VC leaders agree on are the deal terms expected for 2012. A majority in both groups says the deal terms next year will favor the VCs, with strong majorities of both groups expecting an improvement in valuations next year.

"Due to the large number of market and political factors at play, it is incredibly difficult to predict the state of the venture capital ecosystem in 2012," said Mark Heesen, president of the NVCA. "Despite the fact that venture capitalists and entrepreneurs are well positioned to thrive, externalities are keeping optimism at bay. The venture industry is not an island unto itself and economic instability here and abroad, coupled with a number of public policy issues poised to impact the start-up community, can offset the positives such as an improving IPO pipeline and opportunities for FDA and capital markets reform. These uncertainties are clearly to blame for the less sanguine predictions this year. However, it is encouraging to see venture capitalists and entrepreneurs forecasting a number of positives including increasing valuations, headcount, and global activity amidst the realities that face our industry."

- here's the press release