The Silicon Valley Venture Capitalist Confidence Index registered 3.03 on a five point scale in the first quarter of 2009, with five indicating high confidence and one indicating low co
The Silicon Valley Venture Capitalist Confidence Index registered 3.03 on a five point scale in the first quarter of 2009, with five indicating high confidence and one indicating low confidence.
The index is based on a March 2009 survey of 30 San Francisco Bay Area venture capitalists.
This quarter’s reading rose from the previous quarter’s reading of 2.77 (a five year low) and ended a five-quarter trend of new lows in confidence.
Mark V. Cannice of the University of San Francisco and author of the report, says this breaking of the downward trend in VC confidence provides hope for an eventual recovery in the high-growth venture environment.
While concern over the state of the national and global economy and financial system remains, a sense of foreboding appears to be giving way to an expectation of eventual, if slow, recovery in the high-growth venture environment.
Venture capitalists’ concern over the continuing global economic crisis remains, but signs of stabilization have been noted by some of the study’s respondents. However, the macro economy is still seen as negatively impacting several aspects of the venture capital business model.
Chester Wang of Acorn Campus Ventures detailed several issues that remain problematic. Wang maintained that the public market is cheap as an alternative investment to venture capital, and capital calls to limited partners and access to exit markets are tight.
Also linking the macro economic environment to the venture business model, Joe Mandato of De Novo Ventures stated: ‘There is so much concern about the economy and uncertainty in the investor base that deals are becoming much more difficult to finance and funds are needing more time raising money.’
Some respondents envisioned the current economic adjustment as a necessary cycle to ensure the long-term health of the venture environment. And some responding VCs see the downturn in the economy as an opportunity to build great companies.
Others expect the current economic upheaval will lead to an unleashing of sophisticated talent into the entrepreneurial economy. This additional talent coupled with the necessity of efficient execution will tend to produce successful new firms.
For instance, Bruce MacNaughton of Crosslink Capital said: ‘The combination of the poor economy combined with little innovation at big companies leads many bright entrepreneurs to follow their passions, and the best companies get built by following passion.’
Meanwhile, certain sectors of investment were viewed more optimistically.
Bryant Tong of Nth Power said: ‘The Clean Tech sector continues to be one of the few bright spots in venture capital for early stage investors. With billions of government money targeted in this area, R&D will be robust and new and promising technologies will be the result.’
