Study Says Venture Capitalists Are Nervous For the First Time in Years
There's a cool new trend sweeping Sand Hill Road and it's called self-doubt. Just look at your Tweetdeck. Everybody who's anybody is suddenly spazzing out. According to the Silicon Valley Venture Capitalist Confidence Index, confidence levels have chilled for the first time since early 2012.
The survey, which is conducted by the University of San Francisco, says venture capitalists' confidence dropped to 3.89 (on a 5-point scale) in the third quarter of 2014 In the second quarter, it was 4.02.
Professor Mark Cannice, who runs the index, told Bloomberg that the number may have dropped because investors are less sure they will get a return on their investments:
There's "increasing concern about the future of the IPO exit market" as the stock market has fluctuated recently, Cannice said in an interview.
Other fear factors include high valuations and high burn rates. The financiers who capitalized those inflated valuations and incendiary burn rates changed their tune recently and decided to tsk-tsk the irrational exuberance fostered under their watch.
But 3.89 isn't actually that low. It seems more like a minor confidence correction than actual regret. The Silicon Valley Business Journal reports:
One of the VCs in the survey who is growing more cautious is Robert Ackerman of Allegis Capital.
"While the engine of innovation is running at full speed, there is considerable risk of overheating, particularly in consumer sectors," he said. "The excess of capital available to these companies is inflating both valuations and their wage costs. The laws of gravity remain universal and, at some point, we can expect to see a reconciliation between hype and hope."
See, VCs just needed a little reminder that gravity applies to them too.
To contact the author of this post, please email nitasha@gawker.com.
[Image via Shutterstock]