Things are bubbling in Silicon Valley, according to the latest quarterly Silicon Valley Venture Capitalist Confidence Index [PDF], released Thursday. Based on a continuing survey of San Francisco Area/Silicon Valley Venture Capitalists compiled by Professor Mark Cannice at UC San Francisco, the index shows confidence gaining momentum, with a rise from 3.75 in the previous quarter to 3.91 out of 5. This represents a significant jump from the doldrums of late 2008 when the confidence index was in the mid to high 2s.
Several factors are driving this confidence boom, according to the report, including particular exuberance (hopefully not irrational) in the social and mobile sectors, plus general improvements in the economy and public financial markets. Much of the action is in the consumer market, which Bill Reichart of Garage Technology Ventures calls "thriving to the point of bubble-osity."
However, the enterprise market is no slouch either with the low costs of SaaS and cloud models encouraging an increasing number of startups to pursue technology solutions to business problems as well, according to Roy Thiele-Sardina of HighBar Partners. Bruce MacNaughton of Crosslink Capital also points out that mobile device penetration is opening up what he calls "new fault lines" for exploitation by new companies.
All this entrepreneurial activity is helped by more capital coming into the system, both seed and institutional. Venky Ganesan of Globespan Capital predicts a new wave of growth with what he labels a "perfect storm of opportunity created by the intersection of major technology trends (cloud, mobile, social) and the best exit market in a decade." In fact, there were 152 IPOs filed in 2010 compared to a virtual IPO freeze in 2009, according to Igor Sill of Geneva Venture Partners; acquisitions of venture-backed companies are happening at a record pace as well.
There are the usual cautionary warnings. Bob Ackerman of Allegis Capital points out that venture capitalists have invested almost $15 billion more than they raised over the past three years, a model that is not sustainable, and others note overheating in certain sectors. The general sentiment of accelerating confidence is perhaps best summed up by Jeb Miller of JAFCO, who says this is a "fantastic time to be an entrepreneur," thanks to "plenty of available capital and a dramatically improving strategic exit environment."
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