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The Results to Semaphore's Annual Confidence Survey Are In!

Semaphore's 2017 Semaphore Confidence Survey Highlights

All Trump. All the time. Why should the PE community be any different?   The often virulent opinion directed at the President and attendant fears about the capacity of the White House team appears to have no deleterious personal effect on our brethren.  Despite being frightened about Trump our respondents are highly secure about doing well professionally, despite their White House fears. 

The 9th annual Semaphore Confidence Survey is nothing if not entertaining and has enjoyed a reasonable level of accuracy.  While some fear goose stepping brown shirts, “So....this is what Nazi Germany felt like in the beginning.” And, with apologies to Neil Young, “Only Trump can break your heart...and the national will,” we hope neither of those comments proves true.  Last year’s survey showed a trend where, for the first time, our colleagues were reporting not only that they earned less in 2015 than the year before but that they expected their income to go down once again in 2016.  Nope.  80% reported they earned more in 2016 and fully 76% expect to continue that upward trend.  

And apparently Trump will remain good for the 1%.  Sticking to personal income, 57% believe personal income tax rates will drop in 2017 and a full 70% are certain a drop in corporate income taxes will follow.

Notwithstanding Trump’s oft repeated campaign trail pledge to end the currently favorable tax treatment of Carried Interest income only 22% believe he will fulfill that promise. If those 78% are right there is little doubt that the prediction of increased personal income, coupled with drops in corporate and personal income taxes will afford a true personal triple witching hour. No wonder 93% are confident in themselves.

That confidence is shared with few other people or institutions. While President Obama fared extremely well (78% on the confidence scale) his successor only had a 22% confidence score, with 61% not confident.  For some reason, our perennial last place finisher in the confidence polls is Congress (67% no confidence) enjoyed a 21% confidence vote which is 4 or 5 times its usual scoring.

Our respondents continue to be blunt and one of my favorite comments this year was full of industry hubris “Industry, not the president, will continue to create jobs and economic vitality in many sectors.” They present very certain opinions such as “2018 is when the wheels start coming off the bus,” while believing that “2017 will be the year of M&A/IPOs.” Hello Snapchat.

Sectors of investment remained essentially static. Health Care, Enterprise Software, and Financial Services are #1, #2 and #3 in 2016. Those three sectors remain the top three targets of investment in 2017 with Consumer Products and Entertainment breaking into the top 5

The distribution of respondents in the US changed only slightly from past years - the  top six states were 34% California, 21% Massachusetts, 19% New York, 5% Connecticut and 5% Texas. Washington DC 4%, Pennsylvania and Illinois came in at 3% and no other state represented more than 1%.

The UK represented 31% of international respondents, 15% Canada, Germany 9%, China 2% and 2% France, with multiple respondents from Australia, Singapore, the Philippines, Brazil, Russia, Japan, Peru, Spain, Viet Nam and single responses from11 other nations.

Of those who participated this year 30% were from PE shops; 26% were VCs; 7% were LPs; 9% were operating executives; 11% were Investment bankers; and 17 % were third party vendors/advisors to the industry (lawyers, accountants, etc).

Our second year of gender queries showed slightly more diversity with   81% male (89% last year) and 19% female (11% a year ago).

Last year our group overwhelming predicted the correct finalists for President even before the primary votes started.  However, Fully 83% believed Clinton would win the election. Someone I know walking the woods of Chappaqua, NY wishes our colleagues were correct…alas.

I have no better answer for my annual question of what does it all mean. We’ll find out together next year.  If you have time to tear yourself away from getting richer in the face of Armageddon please review and analyze the full results and read many of the comments by clicking here

Mark S. DiSalvo is the President and CEO of Sema4 Inc., dba Semaphore, www.sema4usa.com, a leading global professional services provider of troubled Private Equity, Venture Capital and Hedge funds under management. Semaphore currently holds fiduciary obligations as General Partner for eight funds, is a New Markets Tax Credit provider and advises Limited Partners around the world. Semaphore’s corporate offices are in Boston with principal offices in New York, London and Dallas.

Topics: Semaphore

Semaphore's Annual Confidence Survey

Certainly the past year was a turbulent political mess.  There was clarity by our colleagues on one thing. Fully 56% predicted a Clinton/Trump final. Kudos.  But only 6% of you believed Trump would win with 86% of us expecting a Clinton victory.  We hope those few people who believed Trump would win had equally stunning business results.  And pray that those of us who were certain of a glass ceiling breaking did not bleed to death by a thousand cuts in our business careers. Now that the results are in, will favorable Carried Interest tax treatment be decimated?  Our colleagues thought it would be a fat and happy year.  Was it as people expected?  Do you expect to make even more personal compensation next year than this year?  Might personal and corporate tax rates actually drop?

Annually we ask our readers to weigh in and share their level of confidence in themselves, the economy and their businesses.  President Obama outperformed public polling confidence levels in our community last year while Congress was, essentially, universally hated.  Will Trump fare as well?

Semaphore is conducting its ninth annual survey of Private Equity and Venture Capital partners, principals and professionals supporting the industry. The purpose of this survey is to gather anonymous input from our industry friends and clients with the results fully reported to all. The survey will stay live until late January.

By participating you will get to gauge your expectations with your peers, competitors and industry colleagues. The survey will take 2-3 minutes and respondent identity will not be reported to us.  Results will be published in Term Sheet and on our website www.sema4usa.com.   We know you have opinions – share them with the world and please take the survey.

Click here  to take the survey.

Click here  to see last year's results.

Mark S. DiSalvo is President and CEO of Semaphore, www.sema4usa.com, a leading global professional services provider of troubled Private Equity, Venture Capital and Hedge funds under management. Semaphore currently holds fiduciary obligations as General Partner for eight funds, is a New Markets Tax Credit provider and advises General and Limited Partners around the world. Semaphore’s corporate offices are in Boston with principal offices in New York, London and Dallas.

No Sand Between Our Toes (2016)

Why being at the bar won’t get you a drink but will make your dermatologist smile.

I’ve been spending my summer with lawyers.  It’s not a sentence for misbehavior or because I’ve committed some wrong.  It’s not been at BBQ’s or quaffing beers with my friends at the bar (groan) telling enhanced memory college war stories while listening to the surf above the clatter of conversation. We have not even been competing at Rio inspired beach volleyball pretending each slam - if we could actually jump high enough to make one over a regulation net - was for the gold medal winning point.

Nope.  It’s been nose to the grindstone reviews of complaints and counter complaints, pleadings, filings, hearings, motions, and depositions.  And it’s been fun! Now, not the fun of an exhilarating boat ride against a swift current or being elbow deep into a great steamed lobster fest.  Rather it’s been the joy of winning a tactical position, discovering confirmation of an adversary’s transgression,  laboring under the responsibility of being fully prepared to argue your belief against some very smart colleagues, enjoying the emotional fulfillment of knowing that you are right and having someone in a black robe affirm your belief. Yeah…that may seem like a poor substitute for being at the beach but as far as alternatives go it is certainly better than, say,  Disney World in August.

This year I have relished the privilege of a deep dive in litigation esoterica and SEC regulation, welcomed as a real-world contributor to strategy, even appreciated the more than occasional 2 o’clock in the morning email exchanges, and learned that being a “good” client working with open-minded and keenly intelligent lawyers makes for more than good results.  In our troubled fund practice over the last 15 years we often spurn law firm “help” – particularly at the crisis stage of an intervention as few law firms truly understand the practitioner level consequence of the standard legal playbook on a VC or PE practice that is more medieval than modern.  The vexing engagements we have been working this year required intimate assistance and leadership of a group of attorneys who, in concert with our replacement General Partner practice team, helped secure rights lost, arrested loss of value and fixed governance of particularly dynamically challenging circumstances.  The collective efforts of the Team have given our common Limited Partner clients progress and conclusions that any one of us independently would not have been able to gain.  So here’s a toast, to my friends at the bar who, while keeping me off the beach, have kept me engaged, stirred intellectually and appreciating the fire-power a well-crafted legal and operational strategy can have when dealing with wayward General Partners and the mess they leave behind.  

Here’s hoping next year we are all scrunching sand with beer in hand telling war stories about the terribly active summer of 2016.  Meanwhile our summer labor is not over. I think my lawyer friends spent less time than I did on whatever their version of a holiday may be.  Instead we are all seemingly locked in steel and glass towers under the glow of fluorescent lights rather than risk sunburn. Other than our clients, maybe only our dermatologists applaud the consequence of our busy summer this year!

Mark S. DiSalvo is the President and CEO of Sema4 Inc., dba Semaphore, www.sema4usa.com, a leading global professional services provider of troubled Private Equity, Venture Capital and Hedge funds under management. Semaphore currently holds fiduciary obligations as General Partner for eight funds, is a New Markets Tax Credit provider and advises General and Limited Partners as well as corporations around the world. Semaphore’s corporate offices are in Boston with principal offices in New York, London and Dallas.

Topics: Venture Capital, troubled funds, equity, private equity funds, Semaphore, general partners, LP, business advisory, VC, venture funds, private equity, ethics, business

Semaphore's 2016 Confidence Survey Highlights!

“Oh, oh!” At least that was my thought as initial results came trickling in on the 8th annual Semaphore Confidence Survey.  It showed a trend where, for the first time, our colleagues were reporting not only that they earned less in 2015 than the year before but that they expected their income to go down once again in 2016.  As the presidential campaign is proving out, partial returns and early polling are often wrong!  When full results were compiled and the “polls” were closed, 62% reported earning more in 2015 than the prior year and nearly two thirds have confidence that they will earn even more this year. It seems our respondents believe that they remain on a never ending upward rising income rocket that will never end.  While that may be fodder for Bernie Sanders there are some mild expressions of caution.  Last year more than 80% believed they would earn more in 2015 and nearly 20% fewer in fact did. Maybe the revolution will yet come?

99% of our nearly 485 respondents (a 20% larger sample than last year) were confident in themselves, continuing the all-time high trend. That said, a significant note of caution was observable given that only 75% were confident in their own business compared to 93% last year.

The President fairs better than last year with 59% expressing confidence, up from 43% a year ago. Perhaps this year’s bizarre presidential campaign makes Obama look good. That is decidedly better than the other branch of government, with 5% having confidence in the Congress, dropping 2%. Senate Majority Leader Mitch McConnell held the confidence of only 8% v 7% last year.  Newly installed speaker Paul Ryan is on a honeymoon with a 25% confidence rating that is nearly 3 times higher than former Speaker Boehner.

Our respondents have always been blunt and one of my favorite comments this year was “While our country is run by buffoons, they are still better than other countries' buffoons.”  International respondents agreed, reporting decidedly poor opinions of their governments with 13% expressing confidence in their countries leaders with 81% showing no or little confidence.      

Deal numbers and size continue to grow.  Once again 100% reported completing 4 deals in 2015 and 53% expecting to complete 6 or more deals in the current year, up by 20 points.

 Sectors of investment remained essentially static. Health Care investing stayed on top in expected activity with Enterprise Software remaining at #2 and Financial Services breaking the top 3, up from 5th last year. Business services kept the #4 ranking and Mobile Commerce was 5th, down from 3rd.  Many reported liking the Social/Community Technology, Medical Devices, Consumer Products, Construction and Infrastructure filling out the top ten deal hopes.  

The distribution of respondents in the US changed slightly from past years - the top six were 29% California, 25% Massachusetts, 17% New York (up from 10%), 4% Connecticut and 5% Texas with Washington State outpacing its namesake District on the East Coast by 1 point, tied with Illinois. No other state represented more than 1%.  

International responses were equally distributed with respondents from the UK remaining on top at 26% (down from 31%) of all international survey-takers, followed by 11% Canada, 9% Germany, 7% China, and 3% France  for a top six the same as last year. We received multiple respondents from Australia, Singapore, the Philippines, Indonesia (for the first time) Brazil, Russia, Japan, Viet Nam and single responses from 13 other nations.   

The nearly 500 who participated this year, was over-weighted by VC professionals (44% v. 27% last year) and underweighted by third party professionals (7% v 23%) compared to recent years. I’ve no explanation why. The rest of the mix this year compared to the last year was Buy-out pros (24% v 28%), Limited Partners (11% v 9%), operating executives (8% v 6%) and Investment Bankers (6% v 7)%.

We asked a new question this year about gender, suggested by a respondent to last year’s survey.   89% were Male and 11% Female.

Because of the Presidential campaign we asked your political predictions and desires. 56% predicted a Clinton/Trump contest, 19% suggesting a Clinton/Rubio race, another 8% believing a Clinton/Cruz faceoff, and 3% a Clinton/Bush election.  Fully 83% believe that Clinton will win the Presidency with 6% expecting Trump, 3% each for Cruz and Rubio, 2% Bush and 1% Sanders. Fully 83% believed Clinton would win the election.

When queried about their preference of the person they wished would be President, Clinton received 56%, former NYC Mayor Bloomberg 11%, Rubio 7%, Bush and Kasich with 3%, with Sanders, Speaker Ryan, Mitt Romney and Vice President Biden received 2% each.  Isolated votes were cast for all other current candidates along with Governor Jay Nixon of Missouri, former US Senator Mitch Daniels of Indiana, and author/economist Malcom Gladwell. 

What does it all mean?  We’ll have to wait and see if, perhaps, President Hillary Clinton and Treasury Secretary Bloomberg will let our respondents keep their favorable tax treatments on ever rising income as they express supreme confidence in themselves with a slightly wary eye about others and the economy in general. As usual, review and digest the full results by clicking here.

I’ve always enjoyed the comments received and some of the more interesting are listed below:

“Valuation multiples will return to reality, thankfully”

“If Bernie wins I'm going to move to Sweden...oh wait.”

“Feels like 2007...things are tipping down and whoever gets elected will be a one term president.”

 “The VC music will stop. Commodities will be a mess. Emerging markets will hurt. US and Europe will be OK relative to world. Moving to an island if we get Trump.”

“Politicians fear-monger ahead of elections, and negatively bias economic sentiment. While our country is run by buffoons, they are still better than other countries' buffoons.”

“Early stage tech VC is continuing to decline in terms of fund sizes, number of funds, and capable partners.”

“We need a leader with some cajones in the white house. Can we resurrect Teddy? “

 “…If only the US Government stops interfering into other countries internal fairs, this world will be much more beautiful and safe.”

“Really interested to see how new crowdfunding rules impact the industry. Will small/middle class people get involved? “

“It will be interesting to see if the deal pace continues and how long it takes/if private valuations drop following the public markets slide.”

 “Woe is us. Pogo was right we have met the enemy and he is us.”

“Weak oil, strong consumer!”

“In Series A-D deals nationwide, West Coast VCs are still spraying and praying with little diligence, high valuations, and extending term sheets with no dividends or participation. They put out a term sheet based on product and theme within 2 weeks of an initial meeting and can close shortly thereafter. This is part of the reason valuations are so high.”

 “Of all the sectors, healthcare is still the frothiest. Biotech and devices have been this way for a while, but the absurd valuations have spread to healthcare software and even healthcare services. Strategic investors are mostly to blame for this phenomenon IMO.”

“We are closely watching the commodity markets. Continued declines will make investing in certain of our core sectors difficult.”

“BDCs are under so much pressure from investors and scrutiny to increase transparency that they will continue to trade below book and unable to raise new equity. As such, lower-middle market and middle market private equity will be forced to pay much more for their debt financing. I think within one to two years a new alternative to the BDC shadow banking world starts to develop.”

“Outside of consumer products, the VC world is very overheated and overhyped. I expect a significant sell-off in the unicorn market and more value creation by traditional consumer products businesses.”

 “Confidence in ourselves will be the key. There is plenty of capital around. Re-investment in our own economy is the key. Upgrade, innovate, grow!”

To see the complete highlights of the results of the 2016 Semaphore Confidence Survey please click here.  If you want to do your own comparison, the 2015 Semaphore Confidence Survey results are here.

Mark S. DiSalvo is the President and CEO of Sema4 Inc., dba Semaphore (www.sema4usa.com), a leading global professional services provider of Private Equity and Venture Capital funds under management. Semaphore currently holds fiduciary obligations as General Partner for seven PE and VC funds, is a New Markets Tax Credit provider and advises General and Limited Partners around the world. Semaphore's corporate offices are in Boston with principal offices in New York, London and Dallas

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Semaphore’s 2016 Confidence Survey is Live!

Did the past year prove as fat and happy as people expected?  Last year, for the third year in a row, my industry colleagues expected the prospect of more income, better deal flow and higher confidence in themselves, their peers, and industry.  We heard over the top levels of confidence – did it prove to be so? Will it be repeated this year?  As usual we wonder if you have thoughts on your boss and competitors. Do you expect to make even more personal compensation next year than this year?   Annually we ask our readers to weigh in and share their level of confidence in themselves, the economy and their businesses.  President Obama outperformed public polling confidence levels in our community last year while Congress was, essentially, universally hated.  This year we get to elect a new President and the survey desires to learn your predictions of the nominees, winner and, notwithstanding who actually runs, we’re interested in discovering who you wish will be sworn in as President next January. 

Semaphore is conducting its eighth annual survey of Private Equity and Venture Capital partners, principals and professionals supporting the industry. The purpose of this survey is to gather anonymous input from our industry friends and clients with the results fully reported to all. The survey will stay live until late January.

By participating you will get to gauge your expectations with your peers, competitors and industry colleagues. The survey will take 2-3 minutes and respondent identity will not be reported to us.  Results will be published in Term Sheet and on our website www.sema4usa.com.   We know you have opinions – share them with the world and please take the survey.

Click here  to take the survey.

Click here  to see last year's results.

No Sand Between Our Toes (2015)

How Boulders Turn into Magic Dust

We all know the old phrase “time turns rocks into sand”.  I can see my 3rd grade elementary school nun describing a boulder atop a mountain, its seemingly solid setting being weakened by wind and rain, acid in the rain creating cracks, roots growing out of those cracks further weakening the rock. It may be swept down a stream or tumble from a ridge cracking more and creating stones. Those stones may be pounded by waves from an ocean eventually creating sand.  You all remember that lesson. Strange, but I’ve been thinking a lot about boulders this summer.

We all carry around a boulder that chains us to our desk – a big project, a too demanding boss or just a feeling of obligation.  We’ve had a busy and interesting summer working our Funds, servicing our LP clients, planning at least one large exit from a great portfolio company, crafting the entry into yet another troubled Fund and expanding our rapidly burgeoning state New Markets Tax Credit program. It’s easy to determine we just can’t step away. In truth, we all deserve to be unshackled.  I am blessed with colleagues who more than capably can wrestle the problem of the moment. The enormous crisis, say a fraudulent fund, over time, gets ground into manageable problems dealt with thoughtful deftness and eventually turned into assets. We get to sprinkle our Semaphore magic dust over those seemingly intractable problems and, like most summers, this one has been pitching boulders at us. In truth, we enjoy breaking them down into grains of sand.

But there’s another reason I’ve been thinking about boulders.  My daughter is entering her freshman year at Gettysburg College in a couple of weeks – no doubt a huge transition in life. Celia's own personal journey was marked by a boulder – one that she dug out of a schoolyard with sticks and plastic spoons in a defiant act of pure hubris.  Just a few weeks ago the CBS Evening News featured her story in their “On the Road” segment with Steve Hartman. Take a look.  http://www.cbsnews.com/news/school-rock-said-to-have-magic-powers/

Somehow, over time, the small sustained efforts of a trio of friends turned a one ton boulder into their own magic dust.  Hmmm…maybe those kids might be interested in joining Semaphore someday - then I can spend more time on the beach!

Mark S. DiSalvo is the President and CEO of Sema4 Inc., dba Semaphore, www.sema4usa.com, a leading global professional services provider of troubled Private Equity and Venture Capital funds under management. Semaphore currently holds fiduciary obligations as General Partner for six Private Equity and Venture Capital funds, is a New Markets Tax Credit provider and advises General and Limited Partners as well as corporations around the world. Semaphore’s corporate offices are in Boston with principal offices in New York, London and Dallas.

Confidence Higher Still - Results of 7th Annual Semaphore PE Industry Confidence Survey

Confidence Higher Still

Results of 7th Annual Semaphore PE Industry Confidence Survey

 

By Mark S. DiSalvo

 

Oh how underserving we are. At least that is one take of a combo of answers and comments from the 7th annual Semaphore Confidence Survey.   Our respondents believe the gravy train will never end, despite the incompetence of governments and political leaders around the globe. And, while we feast on the fat and juices exuded from the deals we cook while sometimes making much unexpected or unearned cash (this is near exactly the dual dictionary definition of “gravy”) some of us bemoan the riches and lack of fulfillment.  Whether this is meaningful reflection or meaningless expression there is a hint that some who take our survey need more than money.

 

97% of our nearly 400 respondents (a slightly smaller sample than in recent years) were confident in themselves, continuing the all-time high trend where last year just slightly fewer were self-confident.  The two year trend of confidence in one’s business continues with 93% confident in their business fully 50% higher than as recently as 2013. The President fairs well with 43% expressing confidence, up from 31% a year ago. That is decidedly better than the leaders of the other branch of government, Speaker John Boehner and his Senate Majority Leader mate Mitch McConnell who had a confidence rating of only 7%.  While it is easy to kick Congress, this particular indignity has tumbled from 11% favorable a year ago. I guess it proves that the Republicans can win an election without being loved – especially as the institution of Congress itself has a 97% unfavorable rating. I guess we really do like our Congressman and hate the Congress.

 

In contrast favorability in the PE/VC industry has grown over the year from 80% to 87% - near exactly double what it was in 2013. This despite 57% having no or little confidence in the US National economy and 72% expressing troubled assurance in the International economy.

 

Deal numbers and size continue to grow.  100% reported completing between 1 and 4 deals (our first 100% number ever – I expected we would reach that with an expression of lack of trust in Congress) and 78% expecting to do deals of $5 Million and $25Million with fully a third of us expecting to work on 6 or more deals in the current year up by nearly 20%.

 

So what will all this prospective deal effort be in? Health Care investing stayed on top in expected activity with Enterprise Software remaining at #2 and Digital Media moving from 4th to 3rd. Energy oriented investing fell, like gas prices, from third place to outside the top ten.   Business Services was ranked fourth in prospective deal making and Financial Services remained in 5th place. Agriculture investment stayed in the top ten for the second time.  Social/Community Technology, On-line Consumer Retail, Medical Devices (cracking top ten for the first time), and Food rounded out our top ten deal hopes.  

 

All this confidence takes us to the bank with 73% actually earning more in 2014 than in 2013. 81% expect to earn more this year than they did in 2014 with only 4% expecting to earn less.

 

The distribution of respondents in the US changed slightly from past years - the top six were 27% California, 26% Massachusetts (16% last year), 10% New York, 7% Connecticut and 6% Texas with Washington State outpacing New Jersey by a single percentage point with 4%. DC and Illinois came in at 2% and no other state represented more than 1%. Our US respondents had reasonable confidence in their state governments with 31% expressing confidence - the US Congress pines for that number.   

 

International responses were equally distributed with respondents from the UK remaining on top at 31% of all international survey-takers, followed by 13% Canada, 6% China, 5% Germany and 3% France rounding-out the top five with Germany breaking in this tier for the first time.  We received multiple respondents from Singapore, the Philippines, Brazil, Russia, Japan, Viet Nam and single responses from 13 other nations.  International respondents had depressingly poor opinions of their governments with 3% expressing confidence in their countries leaders with 61% showing no or little confidence.   

 

The 397 of us who did reply this year, down from over 500 last year, was more evenly weighted to past years compared to the overweighting of third party professionals last year. The mix this year compared to the last year was VC (27% v 24% ), Buy-out pros (28% v 25%), Limited Partners (9% v 6%), operating executives (steady at 6%) and third party professionals (23% v 38%) with Investment Bankers separately listed for the first time at 7%.

 

For the third year in a row my industry colleagues continue to see the prospect of more income, better deal flow and higher confidence in themselves, their peers, and industry. This clear read is tempered by the self-doubting and even embarrassed tone of the many comments accompanying the Survey. A number bemoan the choice of their profession, seemingly embarrassed by their income at least one MBA student with five years of PE experience wishing he or she had become an elementary school teacher.  While some boast how wealthy they are, many wish they could do more than just make money – or have time to do something more meaningful beside work.  This is a trend we have not seen expressed in the past seven years of the Semaphore Confidence Survey.

 

Here are a few respondent comments that made me smile:

  1. What right do any of us have to complain? The market is screaming, our comp has a guaranteed floor. America! Capitalism!
  2. Another useless survey (although I was seduced to take it...again.)
  3. My boss remains an idiot. Thank God or he’d never pay me what he does

 

Hope everyone’s expectations are indeed met in 2015 – and for those who need it, you find fulfillments as well as full wallets. Catch you next year.

 

To see the highlights of the results of the 2015 Semaphore Confidence Survey please click here.  If you want to do your own comparison, the 2014 Semaphore Confidence Survey results are here.

Mark S. DiSalvo is the President and CEO of Sema4 Inc., dba Semaphore (www.sema4usa.com), a leading global professional services provider of Private Equity and Venture Capital funds under management. Semaphore currently holds fiduciary obligations as General Partner for seven PE and VC funds, is a New Markets Tax Credit provider and advises General and Limited Partners around the world. Semaphore's corporate offices are in Boston with principal offices in New York, London and Dallas

 

Semaphore's 2015 Confidence Survey

Semaphore's Annual Confidence Survey

Last year hundreds of you told us you hated Congress, thought the President was a failure and expected to make more cash than ever despite the denizens of Washington DC.  Feeling more confident or less confident in the President’s Economic team as we see a Republican House and Senate taking control of the Capitol? Have thoughts on your boss and competitors? Do you expect to make even more personal compensation next year than this year?   Annually we ask our readers to weigh in and share their level of confidence in themselves, the economy and their businesses.  Last year we heard significant levels of confidence – did it prove to be so? Especially as the stock market rose in a continuing bull market and reported PE/VC values (and deal costs) rose as well.

Semaphore is conducting its seventh annual survey of Private Equity and Venture Capital partners, principals and professionals supporting the industry. The purpose of this survey is to gather anonymous input from our industry friends and clients with the results fully reported to all. It will stay live until mid-January.

By participating you will get to gauge your expectations with your peers, competitors and industry colleagues. The survey will take 2-3 minutes and respondent identity will not be reported to us.  Results will be published in Term Sheet and on our website www.sema4usa.com.   We know you have opinions – share them with the world and please take the survey.

Click here  to take the survey.

Click here  to see last year's results.

Semaphore (www.sema4usa.com), is a leading global professional services provider of Private Equity and Venture Capital funds under management. Semaphore currently holds fiduciary obligations as General Partner for seven PE and VC funds, is a New Markets Tax Credit provider and advises General and Limited Partners around the world. Semaphore's corporate offices are in Boston with principal offices in New York, London and Dallas.

Topics: Semaphore

No Sand Between Our Toes (2014)

Why our feet are not stuck in the mud.

I truly thought we might be skipping this 7th annual post – or have to retitle it “Feet Stuck in Mud”.  The cycle of summer seems to start only after the kids leave school and then return. My wife Tricia used to say “summer starts on the 4th of July and ends two weeks later,” and that sentiment brings near universal agreement –especially to those who have to pay attention to the back-to-school shopping rhythm and planning that truly does start in late July.     In truth, I was looking forward to an extended August respite because business was, well – just slow on the new biz development front.   No complaint, we are plenty busy and full of appreciation for clients and obligations we have right now. Our current collection of funds under management and associated portfolio companies are steaming along as we continue the work-a-day obligation of sustaining and growing value.   One of my favorites in the portfolio is going to crash through a $75 million run rate this year after plateauing near $25 million for the last few years.  Exciting stuff!  Our dozen plus Federal New Markets Tax Credit projects are either completed or in the ground, being particularly proud of the redevelopment of Liberty, Kentucky after its near total devastation by a tornado just two years ago.  We have even seen one of our completed University projects jump start an even more advantageous investment in a textbook demonstration of economic development leverage resulting in the creation of a fully privately funded nursing school. New jobs created, lives improved and strong emotional satisfaction from Florida to Oregon and San Antonio to New York City. 

So…what am I grumbling about?  In truth, we love the hunt for new fund and business opportunity.  We revel in the initial introduction to a vexing challenge.  It takes upwards of a year when we work with Limited Partners to help them understand the mitigation opportunities they have when they are involved with a troubled fund and/or recalcitrant General Partner.  All those months of free consulting – becoming intimate of the private troubles and competing interests, managing the diverse opinions and educating all parties about the complexities and opportunities of the intervention process  and the initial entry – is wonderfully exciting all by itself  (even if we don’t get paid for the effort).  I may be overselling that a bit but for those of you involved in biz dev I think you can more readily understand. 

We had at least two funds scheduled to come off the “contemplation and discovery” phase and move into “direct intervention” for the beginning of this summer.  However, for various reasons the engagements were put on pause until the fall.  We even demurred we step into one of those funds because we saw another path that would allow a repair of the GP/LP relationship twinned with some governance and oversight changes. Less income and work for us but it’s about doing the right thing for the client.  I will confess to missing the excitement of walking into a new challenge...alas. 

It was if we were planning to dig our feet firmly into the soft wet beach sand rather than trodding yet a few more airport terminals this August.  Then, just as the doldrums of summer were about to wash over us, BANG, a client crisis arrives.  Nothing is better than being able to stride into a maelstrom of doubt and fear that a challenging situation requires.  I can’t tell you about it just yet (on second thought, I’m likely to never tell you about it unless it becomes a heavily veiled business school case study) but I promise you we are enjoying the trials and pains of putting our clients at ease and reigning in the troubles caused by their badly-behaving GP. 

Maybe Tricia was right.  I did get the frantic initial Limited Partner call on July 20th. Summer did end two weeks after Independence Day.  Oh well, there is always Labor Day weekend.

Mark S. DiSalvo is the President and CEO of Sema4 Inc., dba Semaphore (www.sema4usa.com), a leading global professional services provider of troubled Private Equity and Venture Capital funds under management. Semaphore currently holds fiduciary obligations as General Partner for six Private Equity and Venture Capital funds, is a New Markets Tax Credit lender and advises General and Limited Partners as well as corporations around the world. Semaphore's corporate offices are in Boston with principal offices in New York, London and Dallas.

Topics: Venture Capital, troubled funds, equity, private equity funds, Semaphore, funds under management, general partners, limited partners, LP, portfolio company, venture funds, private equity

Results of 6th Annual Semaphore PE Industry Confidence Survey

 

Confidence at All Time High

Results of 6th Annual Semaphore PE Industry Confidence Survey

 

By Mark S. DiSalvo

Is irrational exuberance on the horizon?  Will the Merry-Go-Round ever stop? Can the Masters of the Universe continue to rule? Notwithstanding the recent February Dow swoon the 2014 Semaphore Confidence Survey suggests No, No and Yes.
Extraordinarily, 91% of our over 500 respondents were confident in their own businesses, fully 50% higher than a year ago. 94% were confident in themselves, an all-time high, growing from78% last year.  In contrast only 31% of respondents expressed confidence in the President with 49% stating a lack of confidence in him, significantly above last year’s 37% number. As miserable as that may be it is decidedly better than the leader of the other branch of government, Speaker John Boehner, who has an 11% favorable v 66% unfavorable rating. As dreadful a rating for sure but it is far better than Congress as an institution with 87% expressing no or little confidence in our elected officials and only 1% offering an expression of confidence in the House or Senate.
In contrast some 80%, nearly double last year’s 43%, remain confident in the PE/VC Industry, while 6% express confidence in the US economy and less than half at 22% enjoying confidence in the International economy. This is expressed in the near wild enthusiasm around expected deal number and size.  96% reported completing between 1 and 4 deals and a similar number expecting to do the same.  More surprisingly is that over a quarter of us completed more than six transactions and fully a third anticipate exceeding that plateau in 2014.  And the deal sizes are growing.  Across venture and PE the average initial investment size is expected to be 50% larger in 2014 than last year. 
So what will all this prospective deal effort be in? Health Care investing shot to top in expected activity, up from fourth. Enterprise Software got bumped to #2 and Energy oriented investing rocketed to third place and last year was not even in the top ten.  With Business Services ranked fourth in prospective deal making with Digital Media and Financial Services tied for 5th place. Agriculture investment broke the top ten for the first time and came in a close 6th.  Gaming was not only out of the money but also failed to make the top twenty. Social/Community Technology, On-line Consumer Retail and Food rounded out our top ten deal hopes.  
And where does all this enthusiasm and confident take us. 77% expect to earn more than they did in 2013 with only 6% expecting to earn less. This on top of the fact that 65% earned more last year than they did in 2012 and 23% reported earning less.
For the second year in a row my industry colleagues continue to see the prospect of more income, more deal flow and high confidence in themselves, their peers, and industry. This clear read comparing the raw highlight data from the 6th annual Semaphore Confidence Survey with last year’s results suggests that our industry remains on the rise.  Too much more enthusiasm and consequent riches and our seemingly hated colleagues in Congress might find it more politically palatable to eliminate capital gain rates on carry.
The distribution of respondents in the US remained nearly the same from past years - the top five were 29% California, 16% Massachusetts, 11% New York, 6% Connecticut and 5% Texas with only New Jersey dropping out of the mix (guess the GW Bridge traffic might have been too heavy to get our usual Garden State respondents to reply). DC 4% and Illinois came in at 3% and no other state represented more than 1%. Our US respondents had reasonable confidence in their state governments with 26% expressing confidence - at least in comparison to the US Congress.    
International responses were quite different.  We had our widest ever distribution of respondents with only the UK remaining on top with 37% of all international survey-takers with (10 points higher than last year) followed by  9% Canada, 7% China and 3% France rounding-out the top four just as they did the prior years. We received multiple respondents from Germany, the Philippines, Brazil, Russia, Japan, Ukraine, Viet Nam and single responses from14 other nations including our first ever from Bora Bora (must have been a PE partner on vacation!). International respondents had depressingly poor opinions of their governments with 5% expressing confidence in their countries leaders, down from 7% in 2013.   
The 563 of us who did reply this year, up from 470 last year, was over weighted by third party professional participants compared to past years.  The mix this year compared to the last year was VC (24% v 39% ), Buy-out pros (25% v 24%), Limited Partners (6% v 13%) operating executives (7% v 6%) and third party professional (38% v 18%). Hmmm…charting this back to the income responses, perhaps the continued increase in income levels is attributable to the transaction fees and expenses associated with our explosion of deal numbers and values.
Comments this year were more muted in tone than past years and can be viewed on the survey highlights link below. Perhaps the tight bandwidth contributed to the lack of wit expressed.   Here is one none-too-pleased respondent commenting on the survey itself:
            “Well done, like an overly charred steak forgotten on a summer BBQ grill. Terrible survey.”
I hate when that happens as I like my steak very rare.
Hope everyone’s expectations are indeed met in 2014.  See you next year.
To see the highlights of the results of the 2014 Semaphore Confidence Survey please click here.  If you want to do your own comparison, the 2013 Semaphore Confidence Survey results are here.
Mark S. DiSalvo is the President and CEO of Sema4 Inc., dba Semaphore (www.sema4usa.com), a leading global professional services provider of troubled Private Equity and Venture Capital funds under management. Semaphore currently holds fiduciary obligations as General Partner for six Private Equity and Venture Capital funds, is a New Markets Tax Credit lender and advises General and Limited Partners as well as corporations around the world. Semaphore's corporate offices are in Boston with principal offices in New York, London and Dallas.

Topics: Venture Capital, troubled funds, equity, private equity funds, Semaphore, funds under management, general partners, limited partners, turnaround, LP, technology, investment, market diligence, venture funds, private equity

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