Silicon Valley Venture Capitalists’ Confidence Dips in March

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University of San Francisco (USF) School of Management Professor Mark Cannice reports that the VC Confidence level for Q1 registered 3.81 on a 5 point scale. This quarter’s index measurement declined from the previous quarter’s index reading of 3.93.

Trend line of Venture Capitalists' Confidence over the last 45 quarters.

"While enthusiasm remained for the current momentum of the private and public financial markets, a growing chorus of concern over valuations of some venture-backed firms is becoming apparent,” said USF Professor Mark Cannice, author of the Q1 report.

The Silicon Valley Venture Capitalist Confidence Index® for the first quarter of 2015, based on a March 2015 survey of 33 San Francisco Bay Area venture capitalists, registered 3.81 on a 5 point scale (with 5 indicating high confidence and 1 indicating low confidence). This quarter’s index measurement declined from the previous quarter’s index reading of 3.93.

This is the 45th consecutive quarterly survey and research report and, thus, provides unique quantitative and qualitative trend data and analysis on the confidence of Silicon Valley venture capitalists in the future high-growth entrepreneurial environment. Mark Cannice, department chair and professor of entrepreneurship and innovation with the University of San Francisco (USF) School of Management, authors the research study each quarter.

In the new report Cannice writes, “While enthusiasm remained for the current momentum of the private and public financial markets and the pace of technology innovation and adoption, a growing chorus of concern over valuations of some venture-backed firms is becoming apparent.” For example, Tim Draper of DFJ said, “I am expecting a very good year for VCs. There are still lots of great companies out there and the public has just scratched the surface of the value.” Igor Sill of Geneva Venture Management detailed, “My confidence level is high as a result of venture's acceleration in 2014, due mostly to the new entrants seeking prospective ‘unicorns’ with larger deals and much higher valuations than anytime I can remember--bigger than our dot.com 2000 era.”

However, John Malloy of BlueRun Ventures offered, “Although the underlying fundamentals driving innovation in Silicon Valley remain strong, the current hyper inflation in late stage private company valuations is a troubling sign.” In addition, Gerard van Hamel Platerink of Redmile Group maintains, “Valuations continue to expand and are becoming more disconnected from business risk. For some investors this will not end well.”

Cannice concluded the report asking whether all of the new sources of capital (e.g. hedge funds, family offices, etc.) come equipped with the complete experience and expertise of venture capitalists in growing enterprises in sustainable ways in changing environments.

Please contact Anne-Marie Devine Tasto to schedule interview time with Dr. Mark Cannice. The complete Q1 2015 Silicon Valley VC Confidence report can be found at https://www.usfca.edu/management/news/SVVCCI_Declines_Slightly_in_First_Quarter_of_2015/.

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Anne-Marie Devine Tasto
University of San Francisco
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Anne-Marie Devine Tasto
USF
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