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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 (, 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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