Investors and entrepreneurs alike are hoping that now that with the uncertainty of the elections in the rear view mirror, investment funds will start flowing again. “There are record levels of cash just sitting on the sidelines,” says Tracy Lefteroff, global managing partner for PricewaterhouseCoopers’ venture capital and private equity practice. PwC and Thomson Reuters produce the quarterly MoneyTree Report, which found that third quarter venture capital investment was down 11% from the second quarter. But Lefteroff sees the wireless sector as a potential bright spot. “The wireless area is still an area where innovation can happen,” he says. “Some people are willing to put a little money to work to explore it.” But Lefteroff says investors are “waiting for macroeconomic factors,” to encourage risk taking. That’s why getting past political uncertainty could make a difference.
“When I look at the political factors, that’s the key driver to me relative to the macroeconomic factors,” says Michael Morrisey, managing principal at Inverness Graham, a Philadelphia private equity firm. Morrissey says that while his firm has found some good opportunities this year, he hopes more companies will come to the market after the election. “If you look at what’s holding back the market I think that the lack of companies’ ability to forecast where they are going to be a quarter or two out has really held back companies going out and either raising money or looking to do something like a controlled recapitalization,” he says. “The worst thing they can do is come out and look to raise capital for growth or look to get a partner for acquisition if they’re not certain where their numbers are going to be.”
Inverness Graham recently completed a controlled recapitalization of RACO Wireless, giving the private equity firm ownership of the M2M service provider. M2M and mobile apps are two of the hottest areas for investors in wireless. “M2M and the broader mobility space is an area that we have actively pursued,” . Morrissey says, adding that his company’s portfolio also includes technology companies that are indirectly impacted by the wireless industry.
Seasoned investment professionals say the worst possible outcome for the markets would be a continuation of the uncertainty beyond Tuesday’s election. For one thing, a lack of leadership going forward could bring the nation to the brink of the “fiscal cliff,” the deep cuts in both government spending and tax receipts that are scheduled to take effect at midnight on December 31.
Harvard business school professor Clayton M. Christensen argues that no matter who is in the Oval Office in January, meaningful investment and job creation is unlikely to accelerate without tax code changes that encourage more patient capital and more investment in education.
