Silicon Valley Venture Capitalists' Confidence Turns Upward in 2nd Quarter After Year Long Decline According to USF Entrepreneurship Program VC Index

Share Article

After declining optimism during the last 12 months, San Francisco Bay Area venture capitalists have recharged their confidence. This is the finding of the University of San Francisco Silicon Valley Venture Capitalist Confidence Index for the second quarter of 2005. The USF Index, which measures attitudes of venture capitalists toward the future high-growth venture environment in the Bay Area, came in at 4.13 on a 5-point scale (with 5 indicating high confidence and 1 indicating low confidence). This is up from 3.96 in the previous quarter and the highest indication of VC confidence for the last 5 quarters.

After declining optimism during the last 12 months, San Francisco Bay Area venture capitalists have recharged their confidence. This is the finding of the University of San Francisco Silicon Valley Venture Capitalist Confidence Index for the second quarter of 2005.

The USF Index, which measures attitudes of venture capitalists toward the future high-growth venture environment in the Bay Area, came in at 4.13 on a 5-point scale (with 5 indicating high confidence and 1 indicating low confidence). This is up from 3.96 in the previous quarter and the highest indication of VC confidence for the last five quarters.

The current USF VC index is based on a July survey of 40 San Francisco Bay Area venture capitalists.

“The spike in confidence appears to be based on significant fundraising at a number of venture capital firms as well as the flow of those funds into new ventures,” said Mark Cannice and Roger Chen, co-creators of the index and professors at the USF School of Business and Management. “The additional flow of funds is also leading to higher valuations of new ventures.”

Cannice and Chen added that corporate spending in information technology and opportunities in the energy and international sector also helped increase confidence.

Most of the VCs who responded to this quarter's survey showed high optimism. For example, Ann Winblad, co-founder of Hummer Winblad Venture Partners, indicated, “...We are currently in a strong innovation cycle for software on both the enterprise and consumer fronts. In the last 16 months we have funded a dozen new software startups, 10 in the Bay area." Dave Epstein of Crosslink Capital confirmed, that "Lots of $$ were recently raised. Anxious VC's want to put it to work. Merger mania continues..."

Also confident, Venky Ganesan, Globespan Capital Partners, commented, “We have turned the curve and the road is clear. The legacy issues caused by the Internet bubble have been mostly cleared; enterprises have gone from “shell shock” mode to “normal business” mode where they are willing to make capital investments to improve productivity.”

However, a few concerns were voiced by some venture capitalists, like Graham Burnette with SBV partners, who pointed out that the high deficits in the U.S. budget are likely to slow the economy and result in a decreasing stock market. Other VCs were concerned about the war in Iraq, the unemployment rate, and the interest rates.

###

Share article on social media or email:

View article via:

Pdf Print

Contact Author

Dr. Mark Cannice
Visit website