Silicon Valley venture capitalists are getting more confident about the robust tech scene, their enthusiasm buoyed by the record level of IPOs last year, according to a report released Tuesday.
According to the quarterly Venture Capitalist Confidence Index survey by University of San Francisco professor Mark V. Cannice, VCs surveyed in the fourth quarter last year registered 3.93 on a 5-point scale of confidence. The confidence ranking notched up from the third-quarter reading of 3.89; 5 is the highest market of confidence. The recent confidence reading is also above the 3.72 average over the last 11 years. The increase indicates strong confidence in investment opportunities, the fundraising environment and more successful IPOs this year.
Cannice surveyed 28 Bay Area venture capitalists from different firms.
Cannice s report attributes the confidence to the last year s strong IPO market as well as the record level of investments and venture capital fundraising. Last year saw the largest number of
IPOs since 2007 and the most money raised since 2000, about $84 billion. Many valley VCs cashed out on successful deals, such as public debuts from Lending Club, which raised more than $865.5 million, and GoPro, which raised at least $491.3 million.
We have had six IPOs in the last five quarters and as long as public markets remain open, the pipeline for liquidity is very robust, Paul Holland, a VC with Foundation Capital, said in the report.
In addition, last year VC firms raised $29.8 billion, a 69 percent increase over the previous year and the largest gain, in both dollar amount and percentage growth, in at least nine years, according to data from Thomson Reuters and the National Venture Capital Association. And VCs invested $23.4 billion into tech last year, the most since 2000.
But along with this surplus of money and confidence has come huge funding rounds — more than $1 billion in some cases — that have driven the market values of some companies through the roof.
My concern is the recent astronomically overvalued pre-IPO prices awarded to Uber, a staggering $40 billion valuation, said Igor Sill of Geneva Venture Management. He said he is also skeptical that Snapchat, Dropbox and Airbnb are each worthy of their $10 billion valuation.
The environment is very good with enough capital for both early- and late-stage deals, one venture capitalist said in the report. The problem is that the valuations are unrealistic and the number of companies in each segment is way too many without much to differentiate them.
