Venture capitalists jittery in sluggish market

Researchers at the University of San Francisco found that confidence among VC firms in Silicon Valley has dropped to its lowest level since 2004.

A total of 32 VC companies were interviewed in the San Francisco and San José areas for the survey.

Confidence was ranked at 3.22 on a one to five scale, the lowest since the university began the survey in 2004, and a drop of more than a point from a year ago.

Much of the fall was blamed on the recent credit crisis and economic downturn in the US.

"VCs emphasised the broadening impact of the credit crisis and general financial market volatility which has caused a drought in venture-backed exits, " said Dr Mark Cannice, a professor at the University of San Francisco's School of Business and Management, and author of the report.

Much of the concern over a sluggish market has lowered expectations on initial stock offerings, causing VCs to worry about return on investment.

The news was not all bad, however. Dr Cannice noted that long-term confidence in the industry remains high, and that many VCs expect the market to pick up by the beginning of next year.

While overall confidence remains low, the study found that firms which invest in companies in the very early "seed" stages of development may find a favourable market.

Dr Cannice credited this to a belief in the industry that the market will pick itself up by the time newer companies are ready to go public.

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