Information technology ventures — especially cloud and mobile — are especially attractive to today’s venture capitalists, a new report shows.
A survey of more than 400 global venture capital, private and growth equity investors showed greater confidence in cloud and mobile investments than those in other sectors such as hardware.
The survey, conducted in May and June by Deloitte and the National Venture Capital Association, measured investor confidence on a scale of 1 to 5, with 5 representing the most confidence in a sector. Within the United States, investors gave cloud computing ventures a score of 4.06 and mobile technology a 3.99. Energy and clean technology inspired the least confidence with 1.92.
Investor interest in cloud and mobile ventures is likely driven by widespread cybersecurity and privacy concerns, Jim Atwell, Deloitte’s National Managing Partner said. “It’s the potential return on investment they see. If you look at mobile devices, and the apps that go on these things, there’s a need for storage and security.”
Analysts forecast continuing growth in the global cloud computing market. A report from Forrester Research projects the industry growing to $214 billion by 2020, from $40.1 billion in 2011. A more recent Forrester report predicts business and government purchases of software — including cloud-based applications — will grow by 3.3 percent in 2013, and 6.2 percent in 2014.
“Tech is an attractive place for VCs,” said Atul Rustgi, partner with Accolade, a D.C.-based investment firm specializing in information technology. “One aspect is cloud computing, which is very different from historical computing where software would be on premise, and would be license based.”
Rustgi noted that Accolade is particularly interested in ventures with a “software-as-a-service model”.
“It’s an attractive business model. Their revenues are re-occurring, the customers are sticky. When you have them, they’re yours for some time.”
Daniel Ahn, managing director of Voyager Capital, a Seattle-based information technology venture firm, has noticed growing interest in cloud investments as more businesses opt for cloud-based software solutions.
“Whenever [growth] like this happens, it introduces a number of needs that arise with it — managing the data, securing the data, cybersecurity in data,”Ahn said. “We, as a firm, tend to focus on enterprise. We’re looking for ‘what are the infrastructure needs’ ” for cloud computing, he said.
But he noted that new technology is cyclical, and often quickly becomes obsolete. “If you look at just computing in general, it tracks a regular cycle. Mainframe computing was disrupted by PCs and services, now we’re seeing a shift from on-site data centers separating into computing on the cloud.”
“[I]t’s another paradigm shift in computing,” he said, adding , “whenever you see a sector growing like this, there’s a lot of hype too, invariably.”