Venture Capital firms see a slowdown
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The Silicon Valley Venture Capitalist Confidence Index fell for the second straight quarter to its lowest levels since the index was started in Q1 2004. The index declined from 3.54 to 3.22 on a 5 point scale. The index is based on a survey of silicon valley venture capitalists conducted by a University of San Francisco study by Prof. Mark V. Cannice and is intended to capture a state of health of the high growth venture environment in the bay area.
Leading cause for concern among VC’s surveyed was the difficult economic environment due to the credit squeeze and volatility of the financial markets resulting in a scarcity of exit opportunities including IPO’s and M&A opportunities for start-ups. The National Venture Capital Association confirmed the slowdown in IPO’s and a 10 year low in M&A activity supporting the declining confidence among VC’s.
Despite a tough environment, VC’s surveyed were optimistic about long term prospects and the quality of ideas that are being pitched by budding and seasoned enterpreneurs alike. Most VC firms are flush with cash raised in 2006-2007 and some continue to invest in early stage investments seeing opportunity in high potential companies that are facing lower valuations in a tough economy. Most VC’s are however optimistic about an upturn in Q4 2008 and 2009.
In another study conducted by Professor Mark Cannice with Ling Ding, The China Venture Capital Confidence Index also witnessed a modest decline for the fourth quarter of 2007. The complete articles are available here for download.
