This is usually a good time for start-ups as they can easily find themselves a source that can fund their venture. But that’s not going to be the case this summer as Bay Area investors are unsure if they should go ahead with funding or not largely because of Facebook’s disappointing IPO and strengthening debt crisis in Europe.
With the announcement of results of Silicon Valley Venture Capital Confidence Index, it has become clear that the confidence of Bay Area investors is on all time low as far as becoming investors for new firms is concerned. In the past, this time has been considered the best time for fundraising as the firms are usually overloaded with cash.
Mark Cannice, the Professor of Entrepreneurship and Innovation from the University of San Francisco who also compiled the report, told VentureBeat that, “Venture capitalists are future-oriented.”
Ridgewood Capital’s Elton Sherwin, one of the investors, said that the reason behind the same is that these days more and more start-ups wish to launch their businesses internationally in the first go. Keeping their demand in mind, investors have to make use of macro-economic trends as far as dealing with China and Europe is concerned.
The report has indicated that it is primarily the life sciences sector that is going to face regulatory restrictions. It has also mentioned that, at the same time, there are other sectors that will not be affected by this—especially the mobile, social, local and cloud market which is stronger than ever. Not only this, even the investors are looking at these sectors with lots of optimism.
“The innovation economy in Silicon Valley continues to hum along, despite the coughs and sputters in the global economy,” said Shomit Ghose of Onset Ventures.
The report also revealed that investors are positive about the exit market. No, the decrease in number of venture-backed IPOs that has been witnessed in the last quarter is not bothering them.
Geneva Venture Management’s Igor Sill confirmed that 168 companies in the IPO pipeline are there in his firm. He also said that, “Our economy is definitely showing strong signs of realizing continued returns for venture investors.”
Another, important information that was revealed in the report was that most of the Start ups these days are migrating to San Francisco and venture capital firms are following them.