As seen in Global Corporate Venturing, April 2015 issue.
Every year, Silicon Valley Bank surveys entrepreneurs and executives to take the pulse of how leaders in the innovation economy are performing – and what they see ahead. It is a really interesting read, with 2015 shaping up to be even better than 2014.
The Innovation Economy Outlook included responses from more than 1,100 executives from software, hardware, cleantech, life science and healthcare companies. Respondents include all stages of business from startups to multinational enterprises in the U.S., U.K. and other global innovation hubs. The survey concluded in January 2015.
After a white-hot 2014, most leaders predict that the trend will continue in 2015. What is interesting is that while business optimism is high, it is also very measured. Some 75% of executives say they met or exceeded their revenue targets in 2014, and two-thirds of those beat their targets by more than 20%. By contrast in 2010, 50% of companies surveyed missed their targets.
In 2015, most companies are hiring, raising growth capital, focusing on sales and expecting to derive more of their revenue from international markets. Still, these executives note there are lots of challenges.
Public and private capital is available, but that doesn't mean it's easy to come by. Eight out of 10 executives say the fundraising environment is challenging. Many investors expect more fully baked business models than in previous boom times, and entrepreneurs and executives for the most part are delivering on these expectations.
For those raising capital, we asked the planned source of their next round: One-third of executives say venture capital, 14% name angel investors, 12% choose private equity, 8% expect bank debt and 7% say corporate investors.
From the survey, SVB President Greg Becker concludes that the fact that companies are hitting revenue targets and raising capital demonstrates that reality rather than over-exuberance is driving optimism in the tech sector.
The survey also underscores how much companies are counting on international growth. More than 65% of companies in the survey say they earn revenue abroad, and one-third of those derived more than 20% of their revenues from overseas in 2014. In 2015, 41% expect to gain more than 20% of their revenues from outside their home country.
A focus of our survey is the UK, and a couple of interesting points are highlighted – UK businesses are more likely than US businesses to have raised funds from individuals. We also asked UK executives about the impact if the UK were to leave the European Union: 64% state that such a move would have a negative effect, with just 2% seeing it as a positive development.
The single biggest challenge highlighted is access to talent. Eighty percent of companies of all sizes say they plan to hire in 2015, with nearly two-thirds expecting to grow headcount by more than 20%. Yet, 95% of those surveyed say it is somewhat or extremely challenging to hire workers with the right skills.
Many technology companies are publicly acknowledging the need for more women in their ranks. Nearly half of the companies in the Innovation Economy Outlook survey do not have a woman on either the executive team or the board, with pre-revenue companies the least likely to have a woman at a senior level. SVB asked executives in the survey if they have programs in place aimed at hiring and promoting women. Only 29% report they do. This is certainly an area in which it would be great to see improvement.
Overall, the outlook is positive with realistic growth expectations. As we enter the second quarter of 2015, it looks like we are in for another amazing ride.
For additional survey data, please visit: www.svb.com/ieo And you can follow the conversation on Twitter at @SVB_Financial and @SVB_UK #InnovationEconomy.