Silicon Valley Venture Capitalists’ Confidence Holds Steady in 1st Quarter of 2005

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The University of San Francisco Silicon Valley Venture Capitalist Confidence Index for the first quarter of 2005 came in at 3.96 on a 5 point scale. This level of confidence is essentially unchanged from the last quarter of 2004, and suggests a healthy level of venture financing and entrepreneurial activity in the Bay Area in the near future.

The University of San Francisco Silicon Valley Venture Capitalist Confidence Index for the first quarter of 2005 came in at 3.96 on a 5 point scale. This level of confidence is essentially unchanged from the last quarter of 2004, and suggests a healthy level of venture financing and entrepreneurial activity in the Bay Area in the near future. The index is based on an April survey of 40 San Francisco Bay Area venture capitalists.

"This quarter's survey reveals a blend of optimism and caution. A good overall economic environment is a key factor for the overall high confidence among the responding venture capitalists. However, certain economic issues such as high energy prices, rising interest rates and spotty corporate spending caused some uncertainty," said Mark Cannice and Roger Chen, co-creators of the index and professors at the USF School of Business and Management. According to them, high confidence mostly focused on consumer related technologies and energy rather than biotech or IT during the first quarter of 2005.

Bart Schachter of Blueprint Ventures said, "The Bay Area is resuming levels of 93-94...the next up-cycle is three to four years away." Also optimistic is Venky Ganesan, Globespan Capital Partners, stating, "We are witnessing an inflection point in the tech funding cycle and are now hitting an upward slope in the funding environment. Silicon Valley has its mojo back – parking lots at Buck’s and Il Fornaio are full, traffic is backing up on 280 and startups are getting multiple term sheets".

Other venture capitalists offered more cautious evaluations. Sergi Martorell of 3i said that, "It is unlikely that we return to boom levels anytime soon. My prediction is cautious optimism and a gradual recovery in the venture entrepreneurial environment." Randolph L. Tom of Dynasty Capital Services said that the old adage of too much money chasing too few deals is still applicable. Brendan Richardson echoed this sentiment, concerned that, "..LP (limited partner) enthusiasm for US ventures will create another wall of money that drives up valuations and results in another bubble. ...So while the near term looks rosy, the long term looks cloudy."

For a copy of the full report, call Monica Leifer, USF assistant director of media relations, at (415) 422-2697. For more information, contact Mark Cannice, associate professor at the USF School of Business and Management, at cannice@usfca.edu or (415) 385-9591.

The report for the previous quarter can be seen at: http://www.usfca.edu/sobam/nvc/cindex_4_2004.htm.

More information on the USF Entrepreneurship Program and its International Business Plan Competition can be found at: http://www.EntrepreneurshipProgram.org.

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