Sixth Annual Innovation Economy Outlook Study Released
Innovation companies overwhelmingly expect improving business conditions and growth in 2015 with most planning to add headcount this year, according to Silicon Valley Bank’s sixth annual Innovation Economy Outlook study released [recently].
As the banker to the world’s most innovative companies and their investors, Silicon Valley Bank conducts its yearly survey to gauge perceptions on business conditions, capital-raising opportunities, hiring and talent, public policy issues and other topics relevant to technology and life science and healthcare companies. This year’s survey included responses from more than 1,100 executives from software, hardware, cleantech, life science and healthcare companies in startup and growth stages of business in the U.S., U.K. and other global innovation hubs.
“Innovative companies of all sizes globally are optimistic about the year ahead, and, in a frothy market, it is equally important that they are confident in their ability to deliver results,” said Greg Becker, president and CEO of Silicon Valley Bank. “The pace of disruption is faster than any time in our 32-year history. From globalization to hiring trends, and even more accurate forecasting, we’re seeing a lot of positive signals for long-term growth in the results of the survey. We look forward to supporting the innovations and successes our clients will deliver this year.”
Companies are Meeting and Beating Revenue Targets
The survey, concluded in January 2015, found that more than three-quarters of respondents met or beat their revenue targets in 2014. The percentage of respondents who accurately projected their growth targets has increased steadily since 2010. Optimism is high among innovation company executives. Seventy-one percent of respondents expect business conditions to improve in 2015 over 2014. Just three percent of participants anticipate conditions getting worse, the lowest percentage since 2010 when the survey began.
Capital is Available, and Challenging to Obtain
Nearly half of innovation companies surveyed reported raising capital in 2014. And while the success rate for doing so increased compared to the previous year, most (81 percent) executives said the fundraising environment is challenging.
Of the companies that successfully raised capital in 2014, 44 percent raised from venture capital firms, 27 percent raised funds from angel investor groups and micro VCs, 15 percent took on bank debt, 11 percent raised funds from private equity and another 11 percent raised money from corporate venture firms. Fifty-four percent of all companies received funds from individual investors and six percent received a government grant. Despite the buzz, crowdfunding is still quite rare, with just three percent of respondents surveyed reporting that they received capital from crowdfunding.
While venture capital continued to play a significant role in funding global innovation firms (venture capital was on average 68 percent of total funds raised for companies that received it), it has become less frequently cited over the last three years as the most likely next source of funding. In 2013, 48 percent of respondents believed their next round of funding would come from venture capital, and 32 percent reported the same this year.
“While there is significant capital being invested in the innovation sector, fundraising itself is a challenge, and we see that as a positive sign for the overall market,” said Becker. “Fundraising isn’t supposed to be easy. The combination of companies hitting their revenue targets and successfully raising capital is telling us that reality, not over-exuberance, is driving their optimism.”
Global Growth is Intensifying
More and more, executives are looking to global markets to grow their businesses, with more than two-thirds of respondents indicating that their companies have earned revenue abroad. In fact, 34 percent derived more than 20 percent of their revenues overseas in 2014, and the expectations are higher for 2015.
The Innovation Sector Continues to Create Jobs
Innovation companies of all sizes expect to hire in 2015, with 77 percent planning to add new talent. Of those planning to hire, 62 percent plan to increase their headcount by more than 20 percent.
For additional survey results, including a more in-depth look at hiring, talent and respondent views on public policy, please visit: svb.com/ieo.
Follow the conversation on Twitter at @SVB_Financial and @SVB_UK #InnovationEconomy.
About Silicon Valley Bank
For more than 30 years, Silicon Valley Bank (SVB) has helped innovative companies and their investors move bold ideas forward, fast. SVB provides targeted financial services and expertise through its offices in innovation centers around the world. With commercial, international and private banking services, SVB helps address the unique needs of innovators. Forbes named SVB one of America’s best banks (2015) and one of America’s best-managed companies (2014).
Silicon Valley Bank is the California bank subsidiary and commercial banking operation of SVB Financial Group (Nasdaq: SIVB), and a member of the FDIC. Silicon Valley Bank and SVB Financial Group are members of the Federal Reserve System.