Venture Capitalists' Confidence Declines For Third Consecutive Quarter
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San Francisco: For the third consecutive quarter, the confidence of VCs are on a decline. The Silicon Valley Venture Capitalist Confidence Index for the fourth quarter of 2011 registered 3.27 on a 5 point scale (with 5 indicating high confidence and 1 indicating low confidence). The report is based on a December 2011 survey of 30 San Francisco Bay Area venture capitalists. This quarter's index fell from the previous quarter's reading of 3.41 and marks the third consecutive quarterly decline in the eight-year running research report. Dr. Cannice says, "The responding venture capitalists in the fourth quarter survey pointed to international economic and political uncertainty along with a constraining national regulatory and tax environment for a decline in confidence in the future venture environment." Dr. Mark Cannice is a professor of entrepreneurship and innovation at the University of San Francisco School of Management. The VC fraternity believes that there are plenty of good company ideas but the carried interest tax policy prospects and general economic uncertainty are dark clouds above their ecosystem. The uncertainty in the global macro-economy has made it difficult for the venture capital investors to extract ROI from their investments. "Despite of this, there is a positive side wherein the entrepreneurial energy is pouring into Silicon Valley from around the world and is growing stronger with the passage of each day. But, the lack of institutional LP support for early stage venture capital will leave hundreds of companies stranded when need more capital later next year," says Bill Reicher, Garage Technology Ventures. The overall macro conditions are causing lots of conservative forecasts by portfolio companies. Additional constraints continue to weigh on the life science sector, due to continued limited partner apathy towards the space. The healthcare continues to be challenged by dampeners of innovation, FDA uncertainity and reimbursement risk. The IPO's of venture backed firms increased in the fourth quarter of 2011 from the previous quarter but were down from the year ago quarter. However the market shows a positive side, wherein the public market valuations are robust, offering optimism to Facebook, Twitter, ProofPoint, and a pipeline of others for a strong IPO market in 2012. Where plenty of black clouds are hovering over the VC ecosystem, new technologies and business models offer hope for the future. Veny Ganesan of Globespan Capital Partners, says, "Investing is about looking through the windshield not gazing at the rear view mirror. The trifecta of cloud, mobile and social are fundamental paradigm shifts that provide a once in a generation wealth creation opportunity for the brave and the driven. Let others worry about the Euro, the housing crisis, the breakdown in Congress, and others, for the seeds of prosperity are sowed only in tumultuous times."

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