Silicon Valley VC Confidence Declines for first time in 2 years

Bloomberg ticker symbol: SVVCCI

by Anne-Marie Devine

USF School of Management Professor Mark Cannice
The Silicon Valley Venture Capitalist Confidence Index® for the third quarter of 2014, based on a September 2014 survey of 33 San Francisco Bay Area venture capitalists, registered 3.89 on a 5 point scale with 5 indicating high confidence and 1 indicating low confidence). This quarter’s index measurement fell from the previous quarter’s index reading of 4.02. The Q3 reading is the first recorded decline in confidence in two years.

This is the 43rd consecutive quarterly survey and research report and, thus, provides unique quantitative and qualitative trend data and analysis on the confidence of Silicon Valley venture capitalists in the future high-growth entrepreneurial environment. Mark Cannice, department chair and professor of entrepreneurship and innovation with the University of San Francisco (USF) School of Management, authors the research study each quarter.

In the new report Dr. Cannice indicates that “The lower Q3 index reading raises some concern for the near to medium term outlook for the high-growth venture environment.” For example, Gerard van Hamel Platerink of Redmile Group reported “There is a general and widely appreciated sense of frothiness in some parts of the market and many people are wondering how it will turn out.” And Jon Soberg of Expansive Ventures noted “The ‘bubble’ talk has grown louder, especially discussion about high valuations and burn rates.”

Silicon Valley VCCO Oct 2014
However, many responding VCs’ confidence was buoyed by the strong IPO market and rampant innovation. For instance, Sandy Miller of Institutional Venture Partners predicted “The outlook for exits this year looks very strong.” And John Malloy of BlueRun Ventures suggested “The Valley will continue to produce major innovations in Mobile Transformation, Cloud Computing, IoT, Digital Security and Crypto Currency over the next 18 months and beyond.”

Cannice concluded that “Worries over inflated valuations and their eventual impact on the venture business model drove the decline in confidence. However, healthy levels of investment and fundraising, rampant disruptive innovation, and VCs belief in the determination of Silicon Valley entrepreneurs kept sentiment at a relatively high level.”

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