An academic study titled “The Silicon Valley Venture Capitalist Confidence Index®: Third Quarter—2014” (Mark V. Cannice, Ph. D, Department Chair and Professor of Entrepreneurship and Innovation with the University of San Francisco School of Management) provides interesting insight into professional venture capitalists’ confidence levels and opinions with respect to the future of the high-growth venture entrepreneurial environment in the San Francisco Bay Area over the next 6-18 months. The results of 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 a 3.89 on a 5 point scale (with 5 indicating high confidence and 1 indicating low confidence).
The study notes that Silicon Valley venture capitalists’ confidence has fallen in the third quarter of 2014 compared to the index reading of 4.02 for the second quarter of 2014. The paper notes that this decline in sentiment comes amid strong but declining levels of venture-backed IPOs and investment from the previous and year-earlier quarters. The study cites data from an October 17th press release by Thomson Reuters and the National Venture Capital Association that reported 23 venture-backed IPOs valued at $2.6 billion in the third quarter of 2014. Despite this apparent decline in the confidence level of Silicon Valley venture capitalists, several respondents maintain that opportunities for innovation remain strong in sectors such as mobile payments, big data, cloud computing, crypto currency and fintech. The study concludes that the venture capitalists’ confidence levels declined in the third quarter of 2014, ending a two-year upward trend in sentiment due to worries of inflated valuations and broader concerns relating to the VC business model; however, the report finds that a “strong if moderating exit market” for venture-backed businesses still remains, particularly for business that adopt the principles of “disruptive innovation,” helping to keep venture-capitalists confidence at a relatively high level.
The full report can be found here.