Venture Capitalists' Confidence reaches three-year high

By siliconindia   |   Thursday, 28 April 2011, 22:35 IST
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Venture Capitalists' Confidence reaches three-year high
San Francisco: The Silicon Valley Venture Capitalist Confidence Index for the first quarter of 2011, based on a March 2011 survey of 33 San Francisco Bay Area venture capitalists, registered 3.91 on a 5 point scale (with 5 indicating high confidence and 1 indicating low confidence.) This quarter's index rose significantly from the previous quarter's reading of 3.75 indicating an increasing upward momentum in confidence since its low point in Q4 2008. This is the 29th consecutive quarterly survey and report thus, provides unique quantitative and qualitative trend data and analysis on the confidence of Silicon Valley VCs in the future high-growth entrepreneurial environment. Mark Cannice, professor of entrepreneurship and innovation at the University of San Francisco (USF) School of Business and Professional Studies, authors the report each quarter. In the report, Dr. Cannice indicates that optimism is growing in fits and starts depending on the sector in question. For example, Bill Reichert of Garage Technology Ventures, one of the VC respondents surveyed, stated, "Venture capital has become a tale of two cities: It is the best of times, it is the worst of times. It is the age of wisdom; it is the age of foolishness." Reichert continued, "or possibly four cities consumer, enterprise, cleantech, and biotech." Upward trends in broad economic measures and public financial markets that are key to the venture industry also supported venture capitalists' confidence. Further, continued adoption by the enterprise and consumer of technologies being developed and enhanced by venture-backed firms (e.g. cloud, social, and mobile) suggests that the list of successful ventures focused on these markets is still growing. Dino Vendetti of Formative Partners echoed this sentiment, stating "The social and mobile web eco systems are growing at a torrid pace. This coupled with the increased availability of angel and early stage venture funding, are driving the creation of a huge number of start-ups in the Bay Area." Improving trends in the broader economy and financial markets are favoring VC investments, Kirk Westbrook of invencor explained "The entrepreneurial environment is reflective of the overall economy, some areas are more fertile and others much less so. I hear rumblings that there are increased inquiries into office space and it appears that after a protracted period there are some IPOs in process that may bring relief to the funding lifecycle that has been missing. The companies that do make it to the public altar will likely be watched closely, as their revenues and stability that have continued to build during this period would be expected to result in?stock prices that, at a minimum, hold steady." Cannice concluded that the trend of increasing IPO exits, rising LP funding, higher valuations and growing venture investment--along with increasing VC confidence--points to a healthy venture capital business model and portends an exciting year in the venture world. In a companion study on confidence among venture capitalists in China, Cannice and his co-author Ling Ding found confidence declining to a two-year low on concerns of bubble valuations, inflation rates and political uncertainty.