The Great Economic Crisis of 2008 has darkened the mood of Silicon Valley venture capitalists, according to a study published this week by Mark Cannice, director of the Entrepreneurship Program at University of San Francisco.
Each quarter since 2004, Mr. Cannice has asked VCs to assess on a five-point scale their own confidence about start-ups and entrepreneurialism generally for the ensuing 6-18 months. His just completed Q3 2008 survey revealed the VC’s confidence level to be 2.89 (with 5 being the most confident), the lowest ever recorded and the fourth new low in a row.
The VCs cited, what else, the impact of the Crisis on their business models and in particular their ability to cash in their investments. There have been only six IPOs this year for example. That’s the lowest number in 30 years. The prognosis for acquisitions is also gloomy since companies are cash-strapped and can’t secure loans easily.
Beyond this, it’s probably just a matter of time before institutional investors decide to allocate less money towards risky VC-type investments.
Mr. Cannice did note that some unperturbed VCs actually scored the current period a 5, the most optimistic rating possible. These people see high-tech entrepreneurs flooding their inboxes with superb ideas and plans, and point out that in the past, many successful start-ups began during economic downturns.
What’s in their Kool-Aid?