Silicon Valley Venture Capitalists' Confidence Falls to New Low

Business Wire, April 17, 2008

USF Report Indicates Lowest VC Sentiment in 4 Years

SAN FRANCISCO -- The Silicon Valley Venture Capitalist Confidence Index for the first quarter of 2008 registered 3.22 on a 5 point scale, falling from the previous quarter's reading of 3.54 to a second consecutive new low in the 4 year history of the Index. It indicates a continuing steep downtrend in venture capitalists' confidence and portends a more difficult entrepreneurial environment in the Bay Area in the coming months. Authored by Professor Mark Cannice of the University of San Francisco School of Business and Management, the current quarterly VC Index (Bloomberg ticker symbol: USFSVVCI) reading is based on an April 2008 survey of 32 San Francisco Bay Area venture capitalists.

"VC concern emphasized the broadening impact of the credit crisis and general financial market volatility which has caused a drought in venture-backed exits," said Dr. Cannice. For example, Eric Buatois of Sofinnova Ventures, indicated "we continue to see good deal flow with innovative entrepreneurs, but the shut down of the IPO window will make investors a bit more cautious." Deepak Kamra of Canaan Partners also noted that the exit scenario is bleak. However, Cannice observed, "Investors in early stage companies, such as Ron Conway of Baseline Ventures and Colin Weil of the Keiretsu Forum, held a generally higher level of confidence. And some other venture investors held out hope for an uptick in exit alternatives by 2009."

In a separate report by Mark Cannice and Ling Ding, the China Venture Capitalist Confidence Index (Bloomberg ticker symbol: CVCCI) for the 1st quarter fell to a new low in the three year history of that Index, coming in at 3.53 on a 5 point scale. Cannice and Ding indicated that Chinese VC confidence fell on concerns of declining Chinese stock markets, a slowing pace of exits, soaring commodity prices, and the impact of the US sub-prime credit crisis on international markets.

In authoring the two quarterly VC indexes, Dr. Cannice sees converging trends of VC sentiment in the US and China as macro economic conditions increasingly span national boundaries and cross border venture money flows link investment expectations. The complete VC Index Reports for Q1 will be available at www.EntrepreneurshipProgram.org (click on the publications tab).