May 28, 2012

2012 Startup Outlook Survey, by Silicon Valley Bank

2012 Startup Outlook Survey, by Silicon Valley Bank

Every year the Silicon Valley Bank published its Startup Outlook Survey. Intimately acquainted with Silicon Valley startups in high technology, software, and clean technology, SVB has their finger on the industry pulse.

“The 2012 Startup Outlook Survey captures a U.S. economy in transition. The technology sector continues to lead the broader economy out of the downturn, posting strong returns even as the overall economy strains to rebound. Dynamic new sectors are growing rapidly, businesses are hiring and startup executives are bullish on the U.S. market. Optimism and confidence remain high.

 Yet warning signs exist — particularly for capital-intensive sectors and those that depend on the government to set market rules. Left unaddressed, these weak spots could grow and ultimately choke the United States’ ability to sustain its position as the leader in innovation based economic growth.”

The 2012 survey highlights the role of technology startups in leading the recovery. Nearly two-thirds of tech starts ups hit or surpassed revenue targets, marking the third year in a row that more tech startups met revenue goals. The majority of respondents were optimistic that business conditions have gotten better of the last year and will continue to improve, hardware and software executives being the most optimistic.

Hiring plans abound for the coming year – with 83% of those surveyed expecting to create jobs this year (90% of software startups plan to hire). Companies view recruiting as a challenge, due to growing competition for talent. Companies are seeing talent pool shortages particularly in high demand specialty areas such as mobile computing and security information technologies.

And while the U.S. remains the location of choice for startups because of its innovative and entrepreneurial mindset, access to capital, and the overall quality of the workforce, there are challenges. The biggest challenges to the U.S. market include the cost of doing business, tax rates and regulations. Life science and cleantech sectors feel the challenges most acutely and therefore feel compelled to expand into the global market. Another challenge in the U.S. educational system is doing an insufficient job of preparing the workforce with the necessary skills. The ability to scale operations and the general economic climate are also ranked high as current challenges.

The entrepreneurs surveyed expressed a lack of faith in the presidential candidates’ ability or willingness to promote economic growth in the innovation economy. Startup executives rated intellectual property protection, health care cost control, regulatory streamlining, and access to highly skilled foreign workers, in this order, as top policy priorities. The fiscal priorities of those surveyed include: investments in ideas and basic infrastructure, via R&D tax credits, R&D funding, tax reform, and investments in technology infrastructure.

To read the in-depth analysis and results of the Silicon Valley Bank 2012 Startup Outlook Survey, visit the bank’s website.

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