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Semaphore's 2024 Confidence Results Revealed

Discover the latest insights from Semaphore's 2024 Confidence Survey

"I’ve got to admit it; it‘s getting better, a little better all the time (can't get much worse).”

With apologies to the Beatles that their music could belie our industry, this lyric came in a comment to our 16th Annual Semaphore Confidence Survey and seemed to summarize the entirety of the record responses received. Our respondents, while recognizing challenges, were decidedly optimistic about themselves, the state of the industry, their ability to deal with inherent problems, and rather certain that incomes would continue to climb.

Four overriding observations deserve note. First, women respondents more than doubled to 25%. Total participation exceeded 1400 responses, double last year and the largest number we have ever experienced. Artificial Intelligence is anticipated to capture the largest investment market share in 2024, far and away the hottest industry sector. Lastly, despite dismal lack of confidence in the Biden administration, over the three weeks the survey remained open, the expectation of whether the President would be reelected grew from 30% in the initial week to 46% at the end - mirroring recent political polls. Someone else with a higher pay grade than me can analyze whether and how all these connect.

The commentary remained enlightening and entertaining. Please conduct your own review and analysis of our audience opinion and whether you abide by them. Click here for the survey results and a representative sampling of commentary on matters of the industry, race, carried interest, sexual harassment, breaking up Big Tech, and whether Sam Altman should be running Open AI – 78% say yes with comments ranging from “He’s a genius” to “He’s a fraud”.

Results intrigued as usual with definitive confidence in yourselves (82%) and a 4X increase in the economy just twelve months ago (40% have confidence today in the US and 12% International), with a single digit 1% confidence in the US Congress. President Biden confidence rating held steady at just 24% with 58% expressing a lack of no confidence in US national tax and spending policies.

For the first time, less than a majority, 47% of you, earned more in 2023 than the prior year, while 58% expect to do so this year. This is a bounce back in confidence as last year we reported the lowest numbers of increased income expectation ever recorded.

Surprisingly, 56% do not support elimination of carried interest rates compared to 70% last year, with 44% apparently agreeing with one commenter that “Greed is not good”.

Our respondents don’t wish to have Big Tech broken up (72%), believe that sexual misconduct, harassment, and gender bias remains a problem (68%), both virtually the same numbers as last year. 51%, a slightly smaller majority than last year at 55%, believe inherent racism is a structural industry obstacle.

Respondents were from 25 states with California, Massachusetts and New York making up 59% of the US response. 38 other countries were represented with 37% of international respondents from Canada, UK and Germany (36% last year).

Males represented 74%, 25% Females and, 1% self-reported Gender X of those participating this year. 9% of you were from PE shops (way down from 24% last year); 34% were VCs; 3% Hedge Funds; 13% LPs; 10% operating executives; 9% Investment Bankers; and 22% third party vendors/advisors to the industry (lawyers, accountants, etc.) – the last two categories were double last year’s proportion.

Back to the Beatles – the song noted is “Getting Better” on the Sgt. Pepper’s album. The initial idea for the song's title came from a phrase often spoken by Jimmie Nicol, the group's stand-in drummer for the Australian leg of their 1964 world tour when he replaced Ringo who was ill. Take a listen https://www.youtube.com/watch?v=EGlo9LzmOME – here’s hoping things do get better all the time.

Check out the complete results and engaging opinion by clicking here.

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

 

Topics: Venture Capital, equity, private equity funds, Semaphore, limited partners, turnaround, technology, diligence, small businesses, growth equity investments, market, analysis, venture funds, private equity, ethics, ethical standards, business, Survey

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

Zombie Funds

 Apocalyptic Future or Salvation?

A few days ago Luisa Beltran of PE Hub asked whether and what we should call the now popular appellation “Zombie Funds”.  I responded to her with the following:

“Here at Semaphore we call them “clients”.  No need for a pejorative characterization. It’s rather matter of fact.   Often it’s because GPs and LPs become mutually misaligned (for instance, when a carry hurdle may never be met it just makes sense for everyone to move on – the GPs to other career interests and the LPs knowingly recognizing that a better more attuned option exists to manage out the fund).

Yes, in some high profile cases it’s because of fraud or malfeasance of a GP that we find ourselves stepping into General Partnerships at the request of the LP.  Certainly those are the notorious examples.  Funny in that the GPs we replace become our best references.  Notwithstanding, generally it’s just good business judgment to let an entity such as Semaphore step in to “refresh” the relationships and more easily get the fund portfolio to perform until appropriate liquidation of the fund. The former GP moves on to other more potentially lucrative experiences, the LPs gets a more profitable eventual liquidation and everyone’s reputation is salvaged.  So let’s commonly drive a stake into the heart of the Zombie mischaracterization and understand that end of fund life sometimes requires good and compassionate hospice care.“ 

Here is the link to some other responses - PEHub.  Take a look.  If you want to discuss this or have a challenging fund situation please write me at mdisalvo@sema4usa.com.

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Semaphore (www.sema4usa.com), is a leading global professional services provider of Private Equity and Venture Capital funds under management and diligence services. 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: troubled funds, equity, private equity funds, Semaphore, funds under management, general partners, limited partners, turnaround, LP

An Office Lunch Table Thanksgiving Tale

 Leftovers and gratitude - a new Semaphore tradition.

By Mark S. DiSalvo

At my Thanksgiving Day table we go around the room and ask each family member (31 this year) to relate just what it is for which they are most grateful.  Responses are variously funny (“my big nose so I can better enjoy the smell of that wonderful pecan and pumpkin pie” or “I’m especially pleased to be taller than my runt older cousin who always tortured me when I was a kid”); poignant (“that Mother’s dementia has allowed her to forget the pain of the past year and simply enjoy our family get together”) and variously serious (getting into a favorite university, the blessing of a new child, etc.).  I’m sure it’s a tradition or experience that many other families enjoy.

On the Monday after the holiday, with my colleagues at our office lunch table, it was noted how I had not written a biz blog post for a couple of months. We agreed I should highlight the recent transaction where we acquired a New Markets Tax Credit platform and trumpet the recent investments. Somehow we got off on the tangent of family Thanksgiving expressions of gratitude.  It struck us that we don’t do the same at work as we do in our homes.  When the gang started discussing that very fact, we went from voicing gratitude for our good fortune to have interesting careers to bemoaning those, some of our relatives and friends that are up against it and pressed economically, in unproductive careers or who don’t have the privilege of a job at all. We discovered, in conversation, that our successes, in and of themselves are unimportant but that true satisfaction came in helping others get the same emotional fulfillment that we enjoy when we turnaround a fund or help a portfolio company earn a new customer. We were amazed to discover we’ve supported the creation of a few thousand jobs over the past decade and resolved, collectively, to see how we can ensure that the dignity of work is afforded to even more people as we continue to invest and nurture our current and future portfolio.  The discussion turned to taxes and universally, albeit some of  my colleagues begrudgingly,  we understood that the moaning about an increase in marginal tax rates and an expected upping of capital gain was a tiny price for the benefit of our  Semaphore Team working together and doing so in this engagingly challenging industry in a great country. Experiencing the ancillary profits of hard work as satisfaction, in and of itself, as well as the emotional stimulation of assisting entrepreneurs and stakeholders alike, we realized, was the true reason we labor. Sure, we like the monetary success but the sense of accomplishment when a business liquidates on its own terms and seeing the unadulterated joy of an entrepreneur actually accomplishing a dream is our most sustaining payoff.

Bottom line, we are privileged indeed.  I think we’ll start a new tradition.  Lunch table Thanksgiving. Nothing goes better with left-over turkey and stuffing sandwiches (with cranberry sauce, of course).  Try it – establishing the tradition of asking your colleagues about what makes them grateful at work.  You might find a new motivation and a reason to believe in yourself. The sandwich isn’t too bad either – lighter on the mayo 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 and diligence services. 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: turnaround, investment, new markets tax credits, portfolio company

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