Silicon Valley Venture Capitalists' Confidence Remains High Despite Sub-Prime Credit Meltdown

Business Wire, Oct 30, 2007

New USF Reports Reveal Insights From Silicon Valley and Chinese VC Communities

SAN FRANCISCO -- The Silicon Valley Venture Capitalist Confidence Index for the third quarter of 2007 registered 4.14 on a 5 point scale, nearly unchanged from Q2, indicating continuing positive sentiment among Bay Area venture capitalists in the near term local entrepreneurial environment. Authored by Professor Mark Cannice of the University of San Francisco School of Business and Management, the new quarterly VC Index (Bloomberg ticker symbol: USFSVVCI) reading is based on an October 2007 survey of 25 San Francisco Bay Area VCs.

"The VC Index remained strong despite and, in part, because of the sub-prime credit market fallout," said Mark Cannice of USF. "This is because large private equity firms rely much more on liquid credit markets than local VC firms do." For example, Richard Yen of Blueprint Ventures indicated, "credit market uncertainty is likely to shift momentum from buyouts to venture capital." An anonymous VC respondent confirmed the "private equity guys are now somewhat constrained."

Additionally, Deepak Kamra of Canaan Partners observed, "a strong exit market for both IPO's and M&A transactions." Dave Epstein of Crosslink Capital ascertained that "there is a good balance between available money and deal flow from quality companies." Cannice believes this equilibrium will allow a sustainable pace of venture investment and growth to continue.

In a separate report by Mark Cannice and Ling Ding, the China Venture Capitalist Confidence Index (Bloomberg ticker symbol: CVCCI) indicated increasing Chinese VC confidence coming in at 3.94 on a 5 point scale. China VC confidence was buoyed by the long term growth prospects of China, demonstrated by a new record of VC investment in Q3, but tempered by excessive valuations and continuing regulatory uncertainty. For example, David Zhang of WI Harper Group offered that "while there are many opportunities for diligent venture capitalists, high valuation is still a general concern and is a cause for caution."

In authoring the two quarterly VC indexes, Dr. Cannice sees converging trends of VC sentiment across the Pacific as US VC firms explore high potential Chinese markets. The complete VC Index Reports for Q3 are available at www.EntrepreneurshipProgram.org (click the publications tab). For more information, please contact Professor Cannice at cannice@usfca.edu or 415.385.9591.