Silicon Valley Venture Capitalists' Confidence Plummets to 4-Year Low

Business Wire, Jan 29, 2008

New USF Report Indicates Rising Caution in Local VC Community

SAN FRANCISCO -- The Silicon Valley Venture Capitalist Confidence Index for the fourth quarter of 2007 registered 3.54 on a 5-point scale, plunging from the previous quarter's reading of 4.14 to the lowest reading in the history of the Index. This significant drop in Bay Area VC confidence portends an uncertain investing climate in the local high-growth enterprise sector 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 a January 2008 survey of 28 San Francisco Bay Area venture capitalists.

"VCs expressed concern over the volatile credit markets and potential broader economic decline - conditions which may make venture exit opportunities more difficult." said Mark Cannice of the University of San Francisco.

Venky Ganesan of Globespan Capital Partners offered a sobering assessment when he remarked, "The Cinderella-like credit ball is over. The clock has struck midnight and the free money liquidity party we all have been enjoying is going to result in a terrible hangover. I fear that we will have a severe recession and this will impact high-tech entrepreneurial activity in a big way." "Short term, the credit crisis is really distracting the financial sector. Like its impact on the economy itself, it will probably be short lived, but it will reduce the enthusiasm for risk," said Steve Carnevale of Point Cyprus Ventures. While VCs are cautious, author Mark Cannice noted, "an underlying confidence in the long term health of the venture market remains, particularly in the Bay Area entrepreneurial eco-system."

In a separate report by Mark Cannice and Ling Ding, the China Venture Capitalist Confidence Index (Bloomberg ticker symbol: CVCCI) for the fourth quarter indicated a more modest decline in Chinese VC confidence coming in at 3.82 on a 5-point scale. Cannice and Ding noted that Chinese VC confidence also fell on fears of a US economic slowdown, but were more closely related to increasing Chinese governmental regulation and inflated enterprise valuations.

The complete VC Index Reports for Q4 are available at www.EntrepreneurshipProgram.org. For more information on either report, please contact Professor Cannice at cannice@usfca.edu or 415.385.9591.