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Cash Trumps Politics

Cash Trumps Politics

Results of Annual Semaphore PE Industry Confidence Survey


By Mark S. DiSalvo

It’s all about the cash.  Reversing a trend, my industry colleagues seem to have the wind at their backs when it comes to their personal income and business expectations - this despite a decided lack of confidence in government, most especially Congress. This clear read comparing the raw data from the 4th annual Semaphore Confidence Survey with last year’s results affords some fascinating insight across business and politics.

Let’s start with pay.  At the start of last year 74% of the over 400 respondents to the 2010 Confidence Survey believed they would earn more money than the prior year. Fully 61% did. And this is over 5 times as many who earned more income in the then prior year. 18% earned the same as the prior year and only 21% earned less, halving the number whose compensation was less the prior year.   Not only are the respondents richer but they also expect to get more so.  57% believe they will earn yet more money than last year, 31% the same amount and only 12% less. We don’t know the sources of this increased comp but for the 61% of our respondents who were PE or VC professionals it’s a fair bet that, like Mitt Romney, they had a much smaller tax rate than our other respondents who presumably paid ordinary income tax rather than the 15% carried interest tax rate.  Perhaps we should ask that specific question next year.

Speaking of Mitt: 47% express they are somewhat confident or confident in Romney against the 11% who express somewhat confidence in Gingrich while, significantly, 0% are confident in Newt. Romney even beats the President by 8% in a head to head match on confidence.

On the negative side, in this particularly contentious Presidential election year,

72% are not confident or not very confident in Gingrich while the numbers are 27% for Romney. Romney again laps the President with 49% expressing a lack of confidence.

Clearly Romney is the favorite in this crowd as one might expect him to best Obama here.  Nonetheless, the small gap in confidence between them suggests that Obama may be in better shape than one could generally predict although he is significantly weighted down by the large non-confidence opinion expressed.  Surely, Gingrich would be the preferred opponent for the current resident of 1600 Pennsylvania Avenue. Surprising still is that Obama does not receive more credit for the growth in actual income and trend of continued growth expressed by respondents.  

There is no wondering or skillful analysis needed when you talk about Congress. Last years lowest ever number of 7% confidence was more than halved to 3%!  Even state legislatures grew in confidence from 27% to 32% (you should know that the top states replying were CA, MA, NY, NJ, CT, TX, WA, NC and then IL).   This does not bode well for any member of Congress running for reelection.  Their jobs may be more at risk than a GP who has made negative returns for, say, two straight funds (in and of itself an all too common experience).

International respondents had crushingly poor opinions of their governments with fully 74% having no or little confidence in their countries leaders, up 4% from last year and still more than double the 31% of two years ago.  The preponderance of our international respondents were from the UK with most replies coming, in order, from France, Switzerland, Japan, German and China. 

Our peers expect to be busy this year. In the beginning of 2011, fully 100% thought they would make up to six investments – and they did. 81% completed up to three deals and almost the same numbers intend to complete up to three deals. Further, those deals were as large as expected with 63% self reporting that their deals were in excess of $25 Million in each discrete investment. 

And in what is the group investing?  The industry stayed rather consistent. Social/Community Technology took the top spot for the first time, moving up from second, swapping places with Enterprise Technology and Health Care remaining third. Sustainable Energy/Cleantech dropped out of the top five (it dropped out of the top ten!) with On-line consumer retail claiming 4th and Gaming staying in 5th.

The over 400 who did reply this year, down slightly from last year, were similar to last year’s mix of VC, Buy-out pros, operating executives and third party professionals. One thing for sure is that this year’s mix of survey takers continued to be very high on themselves believing that 71% (78% last year) were confident in their business and 81% (84% last year) confident in themselves.  Confidence in their bosses dropped to 63%, from 75% expressing that view last year, but still – that is 13 points higher than two years ago and nearly triple the year before.

As always, there was insight and entertainment offered by our contributors.  Channeling Lady Macbeth, one offered “Out out damned Newt” balanced by “Obama's wealth redistribution agenda is destroying the economy of this country”.  An optimist suggested, “Even 9% unemployment still means 91% employment”. Another bemoaned that “I should have gone to law school” - hope that was not one of our attorney respondents.  

We had an infamous commentator from our inaugural survey who said “PE is dead and I wish my boss were too.”   I can’t tell you how many people still ask me about that guy. All have waited for him to resurface.  I can’t say definitively it was the same person but someone this year noted, “PE is not dead. Still wish my boss was.”  That, at least, was a confession that he was wrong a few years ago about the industry, and a comfort that he did not murder his boss.  Whew.

See you next year.

To see the highlights of the results of the 2012 Semaphore Confidence Survey please click here.  If you want to do your own comparison, the 2011 Semaphore Confidence Survey results are here.


Mark S. DiSalvo is the President and CEO of Sema4 Inc., dba Semaphore (, a leading global professional services provider of Private Equity 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 and London.

Topics: Venture Capital, Semaphore, general partners, limited partners, VC, investment, venture funds

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