{"id":654094,"date":"2013-04-24T06:00:46","date_gmt":"2013-04-24T10:00:46","guid":{"rendered":"http:\/\/www.pehub.com\/?p=197923"},"modified":"2013-04-24T06:00:46","modified_gmt":"2013-04-24T10:00:46","slug":"silicon-valley-confidence-index-rises-for-third-quarter-in-a-row","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/654094","title":{"rendered":"Silicon Valley Confidence Index Rises For Third Quarter In A Row"},"content":{"rendered":"

The\u00a0 Silicon Valley Venture Capitalist Confidence Index<\/strong> rose in the first quarter for the third quarter in a row, University of San Francisco Professor Mark V. Cannice<\/strong> said Wednesday. The index of 3.73 (5 indicates high confidence and 1 indicates low confidence) increased from 3.63 in the fourth quarter. The index is meant to measure business sentiment in the entrepreneurial environment of the San Francisco Bay area and Silicon Valley.<\/p>\n

More stable macro-economic conditions provided a favorable back drop for venture capitalists who continue to have faith in the outcomes of their portfolio companies. Below is the confidence report without included tables, which didn’t transfer well to this blog.<\/p>\n

PRESS RELEASE<\/strong><\/p>\n

Silicon Valley Venture Capitalist Confidence Index\u00ae (Bloomberg ticker symbol: SVVCCI)
\nFirst Quarter \u2013 2013<\/p>\n

(Release date: April 24, 2013)
\nMark V. Cannice, Ph.D. University of San Francisco<\/p>\n

The quarterly Silicon Valley Venture Capitalist Confidence Index\u00ae (Bloomberg ticker symbol: SVVCCI) is based on an on-going survey of San Francisco Bay Area\/Silicon Valley venture capitalists. The Index measures and reports the opinions of professional venture capitalists in their estimation of the high- growth venture entrepreneurial environment in the San Francisco Bay Area over the next 6 – 18 months.1 The Silicon Valley Venture Capitalist Confidence Index\u00ae for the first quarter of 2013, based on a March 2013 survey of 30 San Francisco Bay Area venture capitalists, registered 3.73 on a 5 point scale (with 5 indicating high confidence and 1 indicating low confidence). This quarter\u2019s index rose from the previous quarter\u2019s confidence reading of 3.63. Please see Graph 1 for trend data.<\/p>\n

Confidence Index<\/p>\n

A depressed exit market for venture-backed firms in the first quarter of 20132 was not enough to reverse the positive trend in confidence of Silicon Valley venture capitalists. The Index of Silicon Valley Venture Capitalists\u2019 confidence in the future high-growth entrepreneurial environment in the San Francisco Bay Area rose again in the first quarter of 2013. The increase in Q1 confidence made for three consecutive quarters of increasing sentiment among the responding venture capitalists to this quarterly survey and research report. In Q1 venture capitalists credited a stabilizing macro-environment that exhibited less political and economic uncertainty than recent quarters. The passage of time from recent poor experiences with the performance of some social media businesses was also noted as a positive factor. In this less uncertain environment, favorable technology trends were in greater focus and had a larger impact on confidence.<\/p>\n

While concern over the moribund exit market, fundraising challenges, and structural shifts in the venture industry persisted, sentiment tends to be a function of future expectations rather than current circumstances, particularly in the forward-looking venture capital industry. And in the first quarter of 2013 a strong belief in the eventual outcomes of extensive entrepreneurial talent focused on emerging opportunities hosted in a welcoming Silicon Valley ecosystem remained evident. In the following, I provide many of the comments of the participating venture capitalist respondents along with my analysis. Additionally, all of the Index respondents\u2019 names and firms are listed in Table 1, save those who provided their comments confidentially.<\/p>\n

Macro pressures on the entrepreneurial environment appear to be easing. Interpreting a more munificent macro political and economic environment, Dag Syrrist of Vision Capital reasoned that the \u201cUS economy is continuing to pick up speed and Congress is deciding that a sub 10% approval rating actually does not help them; therefore, we may get some semblance of predictability. And, while in the category of a \u2018man can dream\u2019, it’s quite possible that we’ll have a period of continued easy money supply and gradual but steady economic expansion within the US relative to alternative markets – all of which will bode well for the industry.\u201d Jon Soberg of Blumberg Capital added \u201cI\u2019m bullish on the trends in technology and innovation, and the macroeconomic trends are also generally positive.\u201d Debra Guerin Beresini of invencor also expressed cautious optimism, noting \u201cJob growth is climbing, IPO\u2019s are increasing and confidence is growing! However, there is still an abundance of caution in the investment world. While many economic factors are positive, investors are still guarded.\u201d<\/p>\n

An expectation that industry level pressures on the venture capital business model will moderate somewhat is allowing positive sentiment to persist. More optimistic on the future than on the recent past, Bill Reichert of Garage Technology Ventures shared \u201cWe’ve waited through the chilling effect of the troubled IPOs of Zynga and Groupon. There is less frothiness in social\/local\/mobile\/gaming. Calmer heads seem to be prevailing, and the overall market is up.” And Mark Platshon of Birchmere Ventures struck an optimistic chord, saying “The Valley will always reinvent itself or change to build new approaches.” And John Malloy of BlueRun Ventures added that he \u201cstill remains optimistic for the medium to long term outlook for the Valley as the single best market for entrepreneurship.\u201d<\/p>\n

More specifically, exit opportunities are expected to improve. Kurt Keilhacker of TechFund indicated “The rising M&A activity increases the confidence in exits for venture funds and raises overall investment optimism.\u201d Similarly, Alain Harrus pointed out \u201ccontinued momentum driven by large exits in software.\u201d
\nTechnology trends and portfolio firm performance are also supporting the venture business model.<\/p>\n

For instance, Sandy Miller of Institutional Venture Partners explained that \u201cThere are a number of favorable tailwinds for technology venture capital including the resurgence of the enterprise sector and the revival of interest in technology IPOs. I think it will be a strong year for exits, both IPOs and M&A transactions of scale.\u201d And Deepak Kamra of Canaan Partners reported \u201cexpanding consumer and enterprise spending, coupled with major technology shifts to mobile and cloud computing.\u201d Likewise, Bill Byun of 7 Capital affirmed \u201cPortfolio companies are showing significant growth in revenue as well as outlook for the next 6+ months.\u201d And Bob Bozeman of Eastlake Ventures described the entrepreneurial environment as \u201c\u2018less smoke and more fire\u2019 – meaning that opportunities seemed better grounded and less trivial – attracting better quality investment.\u201d<\/p>\n

The availability of seed financing coupled with positive technology trends is also supporting the venture ecosystem. Jeb Miller of Jafco Venture concluded \u201cIts an awesome time to launch a startup in the Bay Area with massive market opportunities riding the platform shifts to cloud and mobile, tremendous talent availability as legacy companies atrophy, and an abundance of early stage capital available to fund new projects. Exit markets continue to improve and with it the energy and enthusiasm of the startup economy.\u201d A venture capitalist respondent who provided comments confidentially agreed, noting a \u201clarge number of startups with a number of angel investors and seed funds…\u201d Furthermore, Dan Lankford of Wavepoint Ventures indicated he is \u201cseeing a lot of seed stage deals, many of which have been self funded up to this point.\u201d Lankford continued, saying there \u201cseems to be a second wave of smaller, more capital efficient cleantech deals.\u201d<\/p>\n

Finding opportunity within the venture industry restructuring, Elton Sherwin of Ridgewood Capital stated \u201cThere appears to be over 400 venture capital firms that are either inactive (stopped investing) or have quietly gone out of business. Despite this there are new companies springing up everywhere. This seems to be driven by three trends: increased angel activity, increased corporate venture investing, and continuing lowering of the cost to start a software or SAS business. The movie, \u201cThe Social Network\u201d may also have helped.\u201d<\/p>\n

However, not all venture capitalists who responded to the Q1 survey agreed with the view of a more munificent environment. For example, Igor Sill of Geneva Venture Management argued that \u201cDespite signs of an improving economy and new found stock market optimism, I sense considerable concern over the impact of governmental policy on the venture capital industry. While public market valuations have more than doubled since 2009, the economic and political uncertainty of private equity continues to hinder venture capital rounds and values. Having said that, cloud based, web centric software innovations with global market access remain the single largest venture growth segment with a 10% increase over 2011 levels to $8.3 billion. This represents the highest level of venture investments since 2001 levels, per the PWC\/NVCA MoneyTreeTM Report. So, I would have to say that I am cautiously keen on all things software and less so on cleantech, bio sciences, computer hardware and medical devices.\u201d<\/p>\n

And Bob Ackerman of Allegis Capital added that \u201cWhile innovation is alive and well, costs are up, staffing is a major challenge, and early-stage capital formation is clearly under pressure in some sectors of the market. Continued macro economic uncertainty certainly does not help on the capital formation side of the ledger.\u201d Another VC contributor observed a \u201ctepid M&A environment.\u201d<\/p>\n

Some sectors for investment (e.g. cleantech and life sciences) continue to be under pressure. Bryant Tong of Nth Power stated that \u201cThe market continues to be difficult for companies in the cleantech space to get funding.\u201d And Lisa Suennen of Psilos explained \u201c…that while the venture capital world is still frothy and accessible to some, for those in the healthcare business it is a very mixed bag. It is easy to get funding for the next great Internet technology but there is little appetite for deals that address the crisis of the US healthcare system and thus solve extremely meaningful economic problems.\u201d These sentiments are consistent with the findings of the recent MoneyTree\uf8ea Report which reported decreases in total capital
\ninvested as well as a decrease in the number of deals for life sciences and cleantech in Q1.3<\/p>\n

A VC respondent who provided comment in confidence acknowledged that the \u201cmedical device centric view of the venture world and things in healthcare have not evolved towards any positive sentiments.\u201d Another respondent also in the life science arena and requesting anonymity elaborated \u201cAvailable venture capital is shrinking given traditional limited partner concerns about venture capital returns over the last decade (as LPs) are cutting back on their allocations to venture capital. Lack of capital availability is hurting both startup and follow-on financing activity, particularly in healthcare. We are in the down part of the cycle, and will be here for a few years until we can start driving better returns for our limited partners. The good news is that, at least in healthcare, valuations are down and entrepreneurs have a new- found focus on capital efficiency, both of which should enhance returns over the next 3-5 years.\u201d<\/p>\n

While opinions varied as to the overall impact of the macro environment on the venture business model in Q1, and challenges continue in some sectors, venture capitalists\u2019 confidence on average continued to rise. In fact, Q1 marked the third consecutive increase in confidence in this quarterly survey. Still, pressures on the overall model continue with funding in some areas becoming more difficult to attain. Thomson Reuters and the National Venture Capital Association reported that despite an increase in the total capital raised, the number of funds launched in Q1 2013 decreased by about one- third from the year earlier quarter, marking the lowest number of funds raised since Q3 of 2003.4 The concentration of available financing among fewer firms is changing the structural dynamics of the venture industry and will necessarily impact the investment strategy of some venture firms (e.g. necessitating larger investments rounds and fewer seed stage deals). Whether less formal modes of seed-stage venture financing will be accompanied by the strategic insight and services typically associated with venture capital firms and what this means for the long term dynamics of the high-growth entrepreneurial environment is unclear at this point.<\/p>\n

While the forces of creative destruction (Schumpeter 1934, 1942) apply to the industries that finance innovation and new venture creation as well as to the enterprises that are financed, the impact of these structural shifts on the overall productivity and competitiveness of wide swaths of American business is difficult to predict. However, a more certain macro political and economic environment would go far in supporting the entrepreneurial ecosystem that has nurtured successive generations of world-class enterprises.<\/p>\n

Mark V. Cannice, Ph.D. is Department Chair and Professor of Entrepreneurship and Innovation with the University of San Francisco School of Management. The author wishes to thank the participating venture capitalists who generously provided their expert commentary. Thanks also to the attorneys of Greenberg Traurig for their on-going support of this research, as well as to Jack Cannice for his copy-edit assistance. When citing the index, please refer to it as: The Silicon Valley Venture Capitalist Confidence Index\u00ae, and include the associated Quarter\/Year, as well as the name and title of the author.
\nThe Silicon Valley Venture Capitalist Confidence Index\u00ae is a registered trademark of Mark V. Cannice. Copyright \u00a9 2004 \u2013 2013: Mark V. Cannice, Ph.D. All rights reserved.<\/p>\n

The post Silicon Valley Confidence Index Rises For Third Quarter In A Row<\/a> appeared first on peHUB<\/a>.<\/p>\n

\n<\/img><\/a> <\/img><\/a> <\/img><\/a> <\/img><\/a> <\/img><\/a> <\/img><\/a> <\/img><\/a>\n<\/div>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

The\u00a0 Silicon Valley Venture Capitalist Confidence Index rose in the first quarter for the third quarter in a row, University of San Francisco Professor Mark V. Cannice said Wednesday. The index of 3.73 (5 indicates high confidence and 1 indicates low confidence) increased from 3.63 in the fourth quarter. The index is meant to measure […]<\/p>\n","protected":false},"author":7545,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-654094","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/654094","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/7545"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=654094"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/654094\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=654094"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=654094"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=654094"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}