Investment Business and Security
At the start of 2011, the investment business expected to return to normal. By September, confidence had drained. If the current volatility in world stock markets is short-lived, then the backlog of IPOs will go ahead. A repeat of 2008 when the IPO window closed down completely would have serious consequences for the venture capital industry and their recipients in security. In the first eight months of 2011, only seven announcements of capital injections were made in security, amounting to $85 million. Most of these involved investment in U.S. companies by U.S. venture capitalists.
Financing is available but there are plenty of high-tech businesses chasing it. In the present climate, it is unlikely the security industry will receive more than it did in the last two years. However, established companies renegotiated debt financing in 2010. This continued in the first seven months of 2011, with five lines of credit negotiated for $1.4 billion. All have been secured by alarm and home automation installation and monitoring companies in the U.S. Two confirmed the funds will be used for acquisition purposes. Goldman Sachs Specialty Lending Group made a $565 million line of credit to APX Alarm, now renamed Vivint.
Few venture capital companies specialize in physical security, as it is not the most attractive technology sector. However, there are segments that are particularly attractive including information security, identity and security solutions, and analytical software.
Despite economic problems, the market will continue to grow in 2012. Growth will depend on geographic regions and IP networking. Financing will become harder to obtain, causing hardships to small- and medium-sized companies unable to deliver ROI that clients demand.