Silicon Valley Venture Capitalist Confidence Index™ Plummets in First Quarter of 2020
SAN FRANCISCO (May 7, 2020) – The Silicon Valley Venture Capitalist Confidence Index™ for the first quarter of 2020 registered 2.33 on a 5 point scale (with 5 indicating high confidence and 1 indicating low confidence). Based on a March 2020 survey of 26 San Francisco Bay Area venture capitalists, this quarter’s index measurement plummeted from the previous quarter’s index reading of 3.6 and is the lowest reading of VC confidence in the more than 16-year history of this ongoing quarterly research.
This is the 65th consecutive quarterly survey and research report (since Q1 2004), and 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, 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, Professor Cannice indicated that “the tragedy of the health pandemic and the accompanying economic shutdown and general uncertainty drove the sharp decline in sentiment.” Paul Tuan of Andra Global, one of the responding venture capitalists in the Q1 2020 report, expects “carnage in venture due to COVID-19.” Another Q1 survey respondent, Dag Syrrist of Vision Capital, added “All funds will be first/foremost focused on existing portfolio triage, and until/unless the health crises are mitigated, the financial impact can’t be solved.” As Howard Lee of Founders Equity Partners explained, “The COVID-19 global crisis is unprecedented in scope and magnitude with nearly all sectors impacted. A prolonged downturn that is longer than the Great Recession will lead to compressed valuations and an IPO market that will be closed to nearly all private companies.”
A few venture capitalist respondents in the Q1 2020 survey and research report were more sanguine. As Alex Fries of Alpana Ventures predicted, “Once the virus is gone, I expect a ‘unicorn’ kind of comeback. There is plenty of cash sitting around and investors will jump into great deals and quickly.”
“With the VC Confidence Index at an all-time low in the 16-year history of this ongoing research, it is reasonable to expect that a shakeup of the venture environment is at hand,” noted Dr. Cannice in his conclusion of the report. He continued by saying, “However, it is often in the midst of abrupt
Schumpeterian transitions that new methods of business and even new industries are created, and Silicon Valley has often been the home of such creation.”
Those interested in viewing the report in its entirety should contact Kellie Samson at ksamson@usfca.edu.
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