Venture Capital Confidence Dips To Two-year Low



There is no tangible evidence that air is coming out of the tech startup market, but its financiers are nonetheless expressing some concern.

According to a quarterly gauge of investor sentiment, confidence among venture capitalists dropped to a two-year low in the three months ended recently. Sky-high valuations continue to be an issue, and economic rifts around the globe are increasingly on investors’ minds.

“Uncertainty over the entry of new types of investors, the rising cost of doing business in Silicon Valley and the potential fallout of macro environment issues (e.g., China, E.U.) also gave pause to some venture investors,” according to the second-quarter Silicon Valley Venture Capitalist Confidence Index.

The index, based on a June 2015 survey of 28 Bay Area venture investors, scored a 3.73 out of 5, declining from 3.81 in the first quarter and reaching the lowest since the first three months of 2013. Confidence now sits at its 11-year average, the report said.

You can read more at: Why one veteran VC is investing despite seeing a bubble

Still, fundraising has yet to show any sign of slowing. In fact, venture investors poured $17.5 billion into start-ups in the second quarter, the most in any period since the dot-com bubble in 2000, according to the National Venture Capital Association.

In addition, investors interviewed for the confidence index showed plenty of optimism. The talent in tech, increased number of funding sources and penetration of technology into every industry were some of the reasons given.

For the skeptics, Allegis Capital’s Bob Ackerman summed up the myriad concerns.

“The unprecedented fundraising and valuations associated with so-called `unicorns’ and the knock-on effects for the venture ecosystem in terms of broader market expectations around valuations, compensation and all aspects of the costs of doing business for venture companies gives reason for substantial pause,” he said in the report. “Expectations are beginning to outpace reality.”



Reprinted by permission.

Image Credit: CC by Jerry Kirkhart

About the author: Ari Levy

Ari Levy is a senior tech reporter for CNBC.

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