Business Information for Entrepreneurs by an Entrepreneur

2009 saw a drop in investment and investment funding across the board, and private equity was no different. By the end of 2009, private equity fundraising closed only 331 funds totaling $95.8 billion, down 68% from 508 total funds and $299.9 billion in 2008.

Where the Funds Were Invested in 2009

The largest portion of private equity in 2009 was leveraged buyouts and corporate finance funds. In 2009, $53.7 billion, or 56%, of all private equity funding went toward those categories. Still, that is a steep drop of 73% from $195.5 billion in 2008 for the same categories. Mega funds, which are corporate buyout funds of $6 million or more, had a tough year as well. Only $14 billion in mega funds were raised in 2009.

Private Equity Funding Drought

Another category of private equity, distressed funds, saw a roller-coaster drop as well. Only 30 funds for a total of $14.2 billion were raised for distressed investments, a drop of 67% from a record year in 2008.

Mezzanine capital was also down in 2009. Only 20 mezzanine funds were raised for a total of $3.3 billion. Compared to 2008, mezzanine funding saw a $43.1 billion in 24 funds last year – which is a 92% drop from the same period a year ago!

Venture capital funding saw the smallest drop of only 55% in 2009. $13 billion in 120 funds were raised compared to $28.7 in 204 funds in 2008.

The Power of Secondary Investments

However, there was strong performance in 2009 with secondary investments. Secondaries are investments made to existing private equities. 2009 saw an 83% increase from 2008 to $17.5 billion. Interestingly, although there was a sharp increase in the amount of secondaries in 2009, both 2008 and 2009 saw the same number of funds raised with 21 funds. Goldman Sachs was the leader of secondary fund, raising with 31% of the private equity in this category.

Private equity appeared to be sticking to what worked in 2009, with the strongest investments in existing secondary markets and in leveraged buyouts. Although private equity had its worst year in 2009 since 2003, the next decade will likely be defined by the activity appearing in 2010.

Venture capital funding dropped 47% from 2008 to 2009, while total money invested dropped 38%, according to the year-end industry stats provided by the National Venture Capital Association and Thomson Reuters. The numbers are representative of the skittishness of venture capital funds over the last few years.

Comparing the Numbers

To put these numbers in perspective, the 2009 year end total venture capital funds raised was only $15.2 billion. That’s the lowest amount of venture capital fundraising since 2004, when the total was $19.1 billion. Keep in mind that venture capital reached a high of $36.1 billion in 2007.

In terms of total venture capital investment given to startup business, the total for 2009 was $17.6 billion, down from a six-year high of $30.5 billion in 2007.

Analyzing the Facts

What do these numbers tell us? The president of the NVCA, Mark Heesen, said in the press release, “Many venture firms stayed out of the fundraising market in 2009, a dynamic that is clearly reflected in the lower volumes.” Heesen goes on to say that 2010 will be a defining period as “…firms will not be afforded the luxury of continuing to wait for market conditions to improve in 2010.”

Looking Forward in Venture Capital

The amount of venture capital activity in both fundraising and investing in 2010 will define how venture capital will conduct business in the next decade. Heesen states,” all signs point to a leaner, more capital efficient asset class comprised of firms with proven track records of delivering value to limited partners. Not all firms will make that cut, but the ones that do will be very well positioned to invest.”

What we do see projected in 2010 is that venture capital firms are cautiously optimistic, according to the Annual Predictions Survey conducted by the NVCA. 63% of all respondents predict that total venture capital dollars invested will remain the same or increase in 2010. 44% of those say they expect to see an increase to $21 to $25 billion in financing.

However, the most respondents, 90%, agree that the number of venture capital firms will decrease over the next five years. 72% state that VC firms will decrease between one and thirty percent.

The bottom line is that 2009 was the lowest for VC funding and investment in five years, and 2010 will be a litmus test for the VC industry for years to come. You can find more stats and interesting data at the NVCA website.

No matter what you sell, your business today faces a continuous struggle for survival amid rabid competition.  I know as well as anyone that it is becoming increasingly difficult to cope with the pressures and demands of the retail consumer market. According to a recent survey, the United States had about 24.7 million small businesses in the year 2005. While setting up a retail business, you may consider including a point of sale system or POS. A point of sale system comes with several benefits and is available in different versions.

Features of the Point of Sale System

A POS system simplifies your day-to-day tasks and lets you manage your business effectively.  The system typically resembles a desktop computer that tackles complex data and integrates lots of functions. The system maintains business transactions, stock management, processes payments and prints reports.

With a POS system your employees can view sales records any time of the day. It is also easier to create price tags for products and print labels for shelves in a short period of time. Different types of databases maintained by the system include consumer, item, department and seller databases. POS systems can be easily networked, meaning you can forward messages, maintain staff attendance records and store receipts. Using this system, you can adjust sales tax and merchandise prices effectively.

Without the POS system, who knows where retail business management would be.  Maybe we'd all still be using manual label machines!