Silicon Valley Venture Capitalists' Confidence Falls to Another New Low

Business Wire, July 9, 2008

USF Report Indicates Lowest VC Sentiment in 4.5 Years

SAN FRANCISCO -- The Silicon Valley Venture Capitalist Confidence Index for the second quarter of 2008 registered 3.07 on a 5 point scale, falling from the previous quarter's reading of 3.22 to a third consecutive new low in the 4.5 year history of the Index. It indicates a continuing downtrend in venture capitalists' confidence in the future high-growth entrepreneurial environment in the Bay Area. Authored by Associate 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 June 2008 survey of 27 Silicon Valley venture capitalists.

"The deteriorating economic landscape was the most often cited reason for a more difficult venture environment and lower confidence," said Dr. Cannice. For example, Steve Carnevale of Point Cypress Ventures stated "We are headed for a major economic problem worldwideO This will impact the revenue generation of portfolio companies, as well as exit strategies and funding sources." And Joe Mandato of De Novo Ventures explained "There is uncertainty in the market. While deal flow remains high, there is not yet an appreciation for the implications of the economy on the exit market and pricing of those exits."

The previous low of VC confidence reported for Q1 of this year preceded the worst quarter (Q2) for IPOs (0) for venture-backed firms in 30 years. The National Venture Capital Association characterized the current drought of IPOs of venture-backed firms "as a capital markets crisis for the start-up community." Cannice stated that the confluence of weakening economic fundamentals and declining VC confidence will make for a difficult entrepreneurial environment in the near term. However, some of the responding venture capitalists in the Q2 survey see an opportunity in the current market downturn. Dag Syrrist of Vision Capital reasoned "In hard times we generally make better investments, companies make better decisions, cash lasts longer and great companies are formed."

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