The Exit Poll report, conducted in conjunction with the National Venture Capital Association (NVCA), makes clear something we’ve known for a while: IPOs aren’t as popular as they used to be. The average offer amount for IPOs has gone up 225 percent since 2007; the average offer amount for M&As has gone up 16 percent in that same time.  Both have seen fewer deals in 2012 than they did five years ago.

According to the report, the information technology sector led with the highest total deal size.

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A total of $6.9 billion went into 997 VC deals in Internet-specific companies over the course of 2011, an increase of 68 percent in dollars and 24 percent in deals from the previous year, when $4.1 billion went into 807 deals. Internet companies accounted for 24 percent of all VC investments in 2011, compared to 18 percent in 2010, the MoneyTree report said.

From the Q4 2011 MoneyTree report (click to enlarge)

But the year didn’t close on the strongest note for Internet VC investments. In the fourth quarter of 2011, $1.29 billion went into Internet companies, a 23-percent decline in dollars from the previous quarter and about even with the fourth quarter of 2010, when $1.25 billion was invested. What made 2011 such a huge year for web VC investments was really the exceptionally strong second quarter, when $2.4 billion was invested in Internet companies.

Another interesting data point from the survey is the large amount of seed and early stage investments seen in 2011 across all industries that received VC funding. Seed and early stage funding as a whole was the higher in 2011 than it has been in at least seven years, according to the MoneyTree report, accounting for 1810 of the 3673 total deals completed in the year — nearly 50 percent of total deal activity.

From the Q4 2011 MoneyTree report (click to enlarge)

The current level of activity may seem a bit frothy, but with the huge numbers of people using the Internet today, many people think this is just the beginning for the industry’s growth in terms of companies and revenue potential. And the non-stop buzz that surrounded the tech industry in 2011 shows the investment dollars were just accompanying the larger excitement around the space. But whether it’s overly hyped or not, with 2012 on deck to be a strong year for web startup exits, particularly through initial public offerings, the Internet VC funding frenzy probably won’t slow down significantly any time soon.

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In 2011, 169 venture firms raised $18.17 billion from limited partners such as university endowments and pension funds. In 2010 the same number of firms raised only $13.78 billion– or 30 percent less. While more money would mean good news, but that isn’t the case.  The number of startups looking for money has gone up sharply. An active angel community and early stage investors that can put money in early stage deals, means entrepreneurs has helped many startups set-up shop. They are likely to face their biggest fundraising challenge at the Series B round, a problem that has been mounting.

From the release:

“This past year we saw more venture capital money raised by essentially the same number of firms, a sign that consolidation within the industry is continuing,” said Mark Heesen, president of NVCA. “We also continued to invest more money in companies than we raised from our investors. Both of these trends – if they continue — suggest that the level and breadth of venture investment is starting to recalibrate to reflect a concentration of capital in the hands of fewer investors. Our cottage industry is indeed getting smaller still and that will impact the startup ecosystem over time.”

For startups, which can find a few hundred thousand in seed funding or a Series A round, by hitting up angel investors or the smaller boutique firms that try to play at the seed and angel level, the impact is likely to be felt as the startup hits the point where it must move from the initial product and users to the massive scale that delivers the type of growth venture firms need. That growth will need more money, and that money is likely part of the Series B round.

Anand Sanwal, the CEO and Co-Founder of VC data provider CB Insights says what’s happening isn’t that Series B financings aren’t necessarily on the decline, there are just more startups firms competing for that money. The money, as Om predicted, has started to go to companies that having wind beneath their wings.

If one looks at venture capital as a funnel the top has gotten fatter, and the Series B point is where it narrows substantially, leaving a lot of orphaned companies. “Seed investments are kind of call option for these big funds so they can re-up at the series A or B if they want,” Sanwal said. “It’s low risk and a low investment amount.”
He stressed that this is for tech, as opposed to the life sciences or green tech industries, which require more capital to start up in general.

He also said that with the smaller funds which could be angels or micro funds of just a hundred million, there’s much less pressure on investors for a big exit, so building up a business to a Series A point and selling it would still make early investors happy. At the high end where the NVCA is tracking funds, such as the $1.05 billion fund Khosla Ventures raised during the fourth quarter, startups need to go big to make an impact on the overall portfolio.

So maybe a Series B raise is when an entrepreneurs needs to evaluate if he or she is in this for the big win rather than the quick flip. And it’s likely that in 2012 we’ll see a lot more entrepreneurs having to make this decision. Do they have the will and enough forward momentum to go big, or is it time to take the money and run? Or maybe just cut their losses and run?

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The second quarter of 2011 saw the highest total amount of money invested by VCs since the second quarter of 2008, according to the MoneyTree report released this week. Quarterly venture capital investment activity increased 19 percent during Q2 compared to the first quarter of 2011, during which VCs invested $6.3 billion in 814 deals (click on image to expand):

And if you think VCs have been putting a lot more money than usual into web startups, you’re absolutely right. Investments in Internet-specific companies rose to the highest quarterly level since 2001. Venture capital firms pumped $2.3 billion into 275 web-oriented companies during Q2 2011, a 72 percent increase in dollars and a 46 percent increase in such deals from the first quarter of the year:

Growth is normally a good thing for the venture capital ecosystem, but it may be starting to get out of hand. “This quarter’s increased investment levels signals an incredible opportunity for job creation and innovation, but if current dynamics continue, it will not be sustainable,” NVCA president Mark Heesen said in a release accompanying the MoneyTree report. “This level of investment cannot continue if we do not start to see a pick-up in exits and, subsequently, fundraising.”

Venture capital firms have had difficulty raising new funds for several years now. And while there is a lot of talk about the recent splashy exits such as LinkedIn’s blockbuster IPO, the fact is that the current return on investment is still not as high as many VCs — or their institutional investors — would like.

But for now, at least, it’s a good time to be building a venture-backed business. “Overall, the increase in investment levels in Q2 remains encouraging for entrepreneurs,” said PwC global managing partner Tracy T. Lefteroff. “At the current pace of venture capital investing, 2011 is on track to exceed $26 billion, which would put it as the sixth most active year in VC investing history.”

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Over at GigaOM Pro (sub. required), I’ve taken a look at what the overall capital trends might be in the venture market and laid out how that may affect startups as they seek funds. I discuss everything from the fact that less capital is going into startups to how the increasing emergence of small funds might affect them, using information taken from a paper by Industry Ventures, a secondary firm (Disclosure: Industry Ventures is an investor in True Ventures, which backs our parent company, Giga Omni Media. Om Malik, founder of Giga Omni Media, is also a venture partner at True.).

Some other key takeaways for dealing with the new environment include how startups need to be realistic about their exit opportunities and seek appropriate amounts of funding for them. Another suggestion is to aim at a market that can be reached using limited funds. Big money will still be there, but it won’t be as readily available. But rather than end on a down note, here instead are some words of encouragement from the report:

First, it’s going to be harder to get funding, but as Paul Kedrosky said via email, “All of this is conspiring to make venture capital harder to come by, which will likely only mean it’s as hard to come by as it was in the mid-1990s, when it wasn’t really that hard to come by at all, historically speaking.”

See, for companies that are realistic about their prospects, have a clear plan and don’t need too much capital, it won’t be so bad. A revenue model may not even be necessary.

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Much ado has been made (here, here and here, for example) of the prediction that clean energy will fare better than most sectors on the financing front (it was the only sector in which survey respondents said they thought investments would increase in 2009).

To be sure, $200 million is a drop in the bucket for a sector that saw $4.6 billion of investment in the first three quarters of 2008, an increase of 82 percent over the same period last year, according to a report released today by Ernst & Young. But if Millennium’s safe-bet strategy is any indication of investors’ approach to clean energy in 2009, then early-stage startups with potential to lead innovation in the coming years may end up spinning their wheels instead. Still, the fund is a likely boon for India, which the National Venture Capital Association expects to be hit hard by loss of capital in 2009.

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Before you make the jump into consolidation of those separate devices with a new AIO printer, you might want to define some simple criteria. What is your budget? What are your needs? Do you know? Well, hopefully this article will set you down the right path. For one, let’s start with a modest budget of $300-400. Next, let’s define some functional criteria.

Recommended Features

• Excellent print quality (documents are readable) even with prints from draft mode
• Network capable (Ethernet), so it can support printing and scanning from the device to a computer and vice-versa
• Automatically copy, print and scan on both sides of the paper (duplexer)
• Automatic Document Feeder (ADF) for multiple page copies/scans
• Separate trays for printing paper vs. photos/envelopes
• Stores at least 150 sheets of paper
• Fax support with memory and auto-redial/fax
• 8.5×14 paper support for printing and scanning
• Color screen for easier readability of device functions
• Excellent customer/technical support
• Great software support for drivers and provided applications
• Six-ink system for more flexibility
• Low total cost of ownership (TCO)

Optional (Bonus) Features

• Wireless network capable
• Printing directly to CDs/DVDs
• Memory card access/support (over the network)
• Photo printing: 4×6, 5×7, 8×10 or larger
• Quiet or moderate noise production

Performance

Printer speed is always subjective, as most manufacturers provide the best specs based upon the lowest quality settings. For example, you will see that at an AIO prints 32 pages per minute in black and white. This seems impressive, yes? Well, this speed example is in draft mode, not full quality.

Until there are metrics that define the entire spectrum of how each unit performs when printing in draft vs. best and color vs. black & white, it just doesn’t make sense to use speed as a realistic criteria.

What are the choices?

Using the above requirements, it probably makes sense to visit your local office supply/big box store and try some of the printers in person. I took the liberty of doing this for you and here are some of the choices available in the specified price range (please note, the prices mentioned are current retail at publishing):

• Canon Pixma MX850 – $199, 5-ink, comes close to meeting the criteria except in build quality as the ADF seems flimsy
• Epson Artisan 800 – $299, New model on the market, ADF does not support duplex copy/scan, print duplexer is a separate purchase, comes with a 2-year warranty
• HP Photosmart C7280 – $269.99 (usually $299.99, although HP has instant rebates now), ADF does not support duplex copy/scan, all other above required features met
• Lexmark X9575 Professional – $249.99, New model to the market, 4-ink, duplex copying and printing (not clear about duplex scanning – although it can duplex copy), comes with 5-year warranty
• Brother MFC-6490CW – $299.99, New model to the market, 4-ink, no duplex support

If you want to stretch your budget by a little:

• Canon Pixma MX7600 – $399, excellent build quality, all criteria met
• HP OfficeJet Pro L7880 – $349.99 (usually $499.99, although HP has instant rebates now), very large dimensions, all recommended criteria met

Getting to one printer from seven

With seven (including the two that stretch the budget) different printer models to choose from, here are some considerations to minimize that choice to one or two.

Let’s take the Brother MFC-6490CW, Canon Pixma MX850 and Lexmark X9575 Professional off the list because they are not traditional six-ink printers. The Lexmark has the option to go six-ink, although there is additional cost.

Printer count: 4

Let’s remove the HP Photosmart C7280 because it neither supports duplex copy or scan. Anecdotally, I really like the form-factor and build quality of the Photosmart. It is a very nice printer with a pretty comprehensive feature set. If duplex is not important, then this model is an excellent choice.

Printer count: 3

The HP OfficeJet Pro L7880 was removed because of its sheer size (it has the largest dimensions at 20.91″ x 19.09″ x 17.48″) and the fact that it is outside the budget of $300. However, with an extended budget, this is a very nice printer as it meets every requirement, including printing 8×10 photos.

Printer count: 2

Recommendations

$300 range – Epson Artisan 800 (full review) as it meets most of the recommended and most optional requirements. It’s only missing feature is the ability to duplex copy and scan.

$400 range – Canon Pixma MX7600 (full review) does meet every recommended and most optional requirements as well. The added bonus is that it, like the HP OfficeJet Pri L7880, has the ability to duplex copy and scan.

Additional Resources

I recommend that you read as many professional and blogger reviews of the products to see if anyone has found any particular issues with the printer you want. Other than some hardware failures, most of the AIOs were reviewed well, so I don’t think you can make a bad choice here. Good luck in your decision making process and toward improving and consolidating your SoHo environment.

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Update: Dow Jones issued a revised version of this release with new median deal value data. Those changes are reflected below.

What’s worse is that M&A activity is down by almost half, median deal prices have dropped to $21.3 million in the latest three-month period from $22 million in the second quarter of 2007 and the median age of companies being sold is 6.9 years, but the median value of those deals is on the rise with prices jumping from $55.8 million in the second quarter of 2007 to to $87.6 million for the latest three-month period according to Dow Jones data. In other words, large tech firms aren’t just shopping for startups, they’re bargain hunting are shopping less but willing to pay more. So even without Without the a credible threat of an IPO, and with venture firms eager for an exit, it’s no wonder that deal prices are going down strategic buyers are willing to pay up.

Fewer deals, older deals and lower prices wreak havoc on a venture firm’s internal rate of return, which they use to show pension fund and other institutional investors how successful they are. The goal is not just to make a huge return, but to do it fairly quickly. So the crumbling exit environment will likely hurt marginal firms, ones that don’t have general partners who can use their influence and position to push deals through.

But this is the exit side of the equation, and it’s just as important to look at what was happening a few years ago when the firms who have since made it to an exit were funded. Given that the median age of firms exiting today is almost 7 years, a good comparison in terms of funding seed and startup companies would be from mid-to-late 2001: Venture firms put in $766 million into 264 seed-stage and startup companies that year, or only 6 percent of the total number of deals (looking at dollars in this case would skew the data), according to the PricewaterhouseCoopers MoneyTree report.

So while I do believe that it’s harder right now for firms to go public, the fact that early-stage funding dove off a cliff after the dot-com bubble and didn’t start a sustained rise until the middle of 2005 means that fewer IPOs may not lead to huge venture crisis. There is a rising backlog of later-stage companies waiting to go public or get acquired, but in a cyclical business it’s important to look at the entire cycle. I don’t think we should panic just yet.

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. . . the pipeline for public offerings has dried up in part because of the considerable shift in the industry’s interest in the last three years into “green” technologies, which was taking time to bear fruit.

Two things are possible in this scenario. First, those expected cleantech IPOs are just not gonna come. The venture investing model could prove to not be as compatible with industries like energy and transportation, as it has been for infotech. Or more cleantech IPOs are on their way, but, as the article suggests, the companies are taking longer to mature.

Either way, the finding is not something that is going to encourage more venture firms to get into cleantech investing. As venture watcher (and one of our favorite blog reads) Paul Kedrosky says to the New York Times: “There is no venture industry if there is no I.P.O. market.”

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With this recorder and the accompanying software, I still can’t get perfect transcriptions of phone interviews I do (I do a lot of these), but the accuracy is remarkably good.

For most speakers on the other end of the line, the Sony recorder and Dragon combine for about 90 percent accuracy. If the person I’m speaking to has unusual inflections or an accent, the accuracy rate is lower and I tend not to use it, but I’ve gotten to the point where I can tell in advance about how accurate the recognition will be.

Dragon’s software is recognized by many people as the best commercially available speech recognition software, and I’m glad to see that ScanSoft is continuing to develop it, after it languished for a few years. Note that whenever you use speech recognition software, you want to train the software in advance.

If you do a lot of transcriptions of interviews and the like, at about $270 online, this combination of a digital recorder and software is a real time-saver. It won’t work all the time for every person who is speaking, but it works well enough to be very useful.

Do you use speech recognition software?

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