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:
- What right do any of us have to complain? The market is screaming, our comp has a guaranteed floor. America! Capitalism!
- Another useless survey (although I was seduced to take it...again.)
- 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.
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