On Tuesday, we announced the results of DLA Piper’s fifth Technology Leaders Forecast survey.

Click here to download a copy of the survey.

Today we’re addressing some of the key implications of the survey results.

Economic headwinds challenge tech startups and the IPO market

The DLA Piper Technology Leaders Forecast surveys have shown a solidifying opinion among technology leaders that there is a “New Normal” in the model for building and investing in startup technology companies. Approximately two-thirds of executives surveyed believe the operating environment has been permanently altered in some significant way.

Helping to drive that change are changes in the IPO market. In DLA Piper’s April 2012 survey, nearly 75 percent of technology, venture capital and private equity leaders stated that they believe the IPO market will not return to historical levels.

In the span of a decade, from the bursting of the “Dot-com Bubble” through the “Great Recession” and into this subsequent period of tepid economic growth, the operating environment for startup tech companies and their investors has certainly changed. According to a report by the US Census Bureau, the business startup rate, the number of new firms as a percentage of all firms, has fallen to a low of eight percent. That’s down from a high of 13 percent in the 1980s and a rate of 11 percent as recently as 2006. The Census Bureau report also found that startup firms from one to five years old now account for only 35 percent of all businesses, as compared to approximately 50 percent in the 1980s.

As Peter Astiz, Global Co-Head of the Technology Sector at DLA Piper commented in a press release issued today, “The reduction in IPOs has broader implications, reducing the number of dramatic home runs for venture capital investors and lowering overall returns. Fewer IPOs also means fewer small- and medium-size public technology companies, which traditionally have been the acquirers of smaller tech companies.”

More than 60 percent of technology executives responding to the technology survey said the traditional venture capital and tech startup model had been permanently altered as a result.

In the Q4 2012 version of the survey, technology leaders identified those uncertain economic conditions (51 percent) and access to capital (51 percent) as the most significant challenges facing technology startups. The economic headwinds were also cited as a leading challenge to a more robust IPO market (59 percent), as well as the recent lackluster performance of major IPOs (65 percent) and over-regulation (27 percent).

Election Debate on Private Equity Expected to Translate into Regulation

A strong majority (78 percent) of respondents to the DLA Piper Technology Leaders Forecast Survey believe that the presidential campaign dialogue that has centered on Mitt Romney’s business background in, and the role of, private equity has damaged the reputation of the private equity and venture capital industry. Further, a strong majority (65 percent) predicted this focus could lead to new regulation of the industry.

As would be expected, among private equity managers and venture capitalists specifically, the concern is even deeper: 93 percent think the presidential race has damaged the reputation of their industry.

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Respondents also sounded off about the burdens of regulation, and the cost of compliance, when given the opportunity to comment about the technology environment in general. Regulation was mentioned more than any other challenge facing the industry:

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