"Venture capitalists’ confidence has sunk to a new low, according to a report released Wednesday by Mark V. Cannice, founder and director of the University of San Francisco Entrepreneurship Program, who surveys Silicon Valley venture capitalists every quarter.
Mr. Cannice asked venture capitalists how confident they are about the high-growth entrepreneurial environment over the next six to 18 months on a scale from one to five, with five being the highest confidence. In the third quarter, their confidence level was 2.89, the lowest it has been since he began the survey in 2004 and a fourth consecutive new low.
The reason most cited for the pessimistic outlook was the unprecedented deterioration of the economy and the resulting impact on the venture business model, Mr. Cannice said. The I.P.O. markets are shut off to venture-backed start-ups. Only six have gone public this year, the lowest number since 1977, according to the National Venture Capital Association.
“Venture
funds are frozen with uncertainty,” Dag Syrrist of Vision Capital told Mr.
Cannice. Another investor, Joe Mandato of De Novo Ventures, said his confidence
level was 3.5, not because of lack of venture money or good deals, but because
of the uncertainty over how to cash out of investments.
The federal bailout plan for Wall Street will hurt the venture industry by sharply lowering valuations of venture firms’ portfolio companies, worried Igor Sill of Geneva Venture Partners. Institutional investors will eventually put less money into venture capital, predicted Steve Carnevale of Point Cyprus Ventures.
Venture capitalists’ responses have so far always been prescient, Mr. Cannice said. Confidence began to severely decline in the last quarter of 2007, even though that quarter was strong for I.P.O.s. The next quarter, I.P.O.s dropped off.
One bright spot: venture capitalists had the widest range of confidence in the third quarter since Mr. Cannice began surveying them. Some responded with the highest confidence rating possible, saying that high-tech entrepreneurs are as active and hopeful as ever. Historically, downturns have spawned successful start-ups, said Robert Ackerman of Allegis Capital."
[source: here]
