Welcome Uptick in Venture Capitalist Confidence

Thanks to this story in today’s Mercury News, I noticed that Silicon Valley Venture Capitalist Confidence Index showed a welcome and rather surprising uptick in 1Q09.

The index, produced by the University of San Francisco Entrepreneurship program, has tracked venture capitalist confidence since 1Q04 and hit its all-time low (2.77 out of 5) in 4Q08 and then re-bounded somewhat in 1Q09 to 3.03.


This quarter’s reading rose from the previous quarter’s reading of 2.77 (a 5 year low) and ended a five-quarter trend of new lows in confidence. This breaking of the downward trend in VC confidence provides hope for an eventual recovery in the high-growth venture environment.

In fact, several of the VCs surveyed made the increasingly popular argument that the best companies are founded in bleak times, presumably as would-be entrepreneurs either flee or are laid off from their ailing employers:

And some responding VCs see the downturn in the economy as an opportunity to build great companies. Prashant Shaw of Hummer Winblad Venture Partners shared, “In a struggling economy, the real innovators emerge. And for firms like ours who have capital, there is no better time to invest in new startups.” And Sandy Miller of Institutional Venture Partners reasoned, “While the environment seems gloomy with no end in sight we need to remember that some of the best companies have been founded and built during bleak times. True entrepreneurs will continue to find ways of moving their ideas forward. From a venture investor standpoint 2009 and 2010 should be an attractive environment for new investments though there will be little liquidity for existing investments.”

For those wanting more detail, here is the full 1Q09 venture capitalist confidence report (PDF).

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