Bay Area Venture Capitalists' Confidence High with Active IPO Market

Business Wire, July 17, 2007

New USF Report Reveals Insights from VC Community

SAN FRANCISCO -- The Silicon Valley Venture Capitalist Confidence Index for the second quarter of 2007 registered 4.15 on a 5 point scale, indicating positive sentiment among Bay Area venture capitalists for the near term local entrepreneurial environment. This quarterly index report is based on a June 2007 survey of 31 San Francisco Bay Area venture capitalists.

Authored by Professor Mark Cannice of the University of San Francisco School of Business and Management, the quarterly VC Index (Bloomberg ticker symbol: USFSVVCI) measures and reports the opinions of Silicon Valley venture capitalists in their estimation of the entrepreneurial atmosphere during the next six to 18 months.

"A better environment for exits, particularly IPOs, was the primary driver for the high level of confidence this quarter," said Mark Cannice of the University of San Francisco. "Additionally, high valuations and good deal flow from entrepreneurs both nationally and internationally supported local venture capitalist confidence."

"We can see a nice reopening of the public market (NASDAQ) for technology companies," remarked Eric Buatois of Sofinnova Ventures, one of the participants in the survey. Venky Ganesan of Globespan Capital Partners maintains the IPO market opening will fuel additional investments in the Bay Area. "The IPO market is like the river Nile for the venture business--all life eventually flows from it," said Ganesan.

Observing the current liquidity trend in the context of the last eight years, David Epstein of Crosslink Capital noted, "there is a confluence of the surviving companies post 1999-2000 bubble becoming stronger and raising reasonable rounds in anticipation of an exit. The availability of capital coupled with a strong IPO market, provides for a very healthy deal flow of quality companies."

High multiples and valuations during exits are also complementing the improved IPO environment. "The current climate is characterized by a high amount of activity and liquidity, and upward pressure on valuations. I would expect this to continue for at least six to 12 months," commented Steve Harrick of Institutional Venture Partners.

While the level of VC confidence was down marginally from last quarter's three year high of 4.38 (due to some concern about overly high valuations and the staying power of the private equity market), overall the VC confidence is very healthy and bodes well for the balance of 2007.

For more information, please contact Mark Cannice at cannice@usfca.edu or 415.385.9591. The full VC Index Report for Q2 is available at www.EntrepreneurshipProgram.org (click on the publications tab).