Venture Capital affected by the crisis

Is already known that U.S is the economy with the biggest Venture Capital market, and reaches the first position of Venture Capital environment in the world.

And is also known that the Venture Capital began and is actually concentrated in San Francisco/Bay area.

Is the reason why some people created the "Silicon Valley Venture Capitalist Confidence Index" a company for measure the confidence in the VC market.

Is a quarter analysis and is based in a 5 points scale.

The index was created in 2004, reaching 4.3, but in the third quarter of 2007, the confidence pumped and put in 3.54, for this second quarter of 2008 the index reach their lowest level, 3.07.

The causes for this low level are related to:

Credit Crunch.

Richard Yen of Blueprint Ventures said “The optimism in the entrepreneurial environment has been dampened recently by the turbulent public markets, particularly the NASDAQ tech stocks.”

I see 3 points:

The problem is affecting the liquidity of the sector 

The VC & Entrepreneurs are not getting IPO because they dont see a good playground for it

Increasing of the interest rates will impact the Limited Partners (LP)

Re-structuration of VC firms:

Steve Carnevale of Point Cyprus Ventures said, “You are seeing more of the old venture firms breaking up due to generational problems, and new funds are becoming smaller. Some are concluding there is not that much need for another venture firm"

But, there are some Golden spots:

Jim Watson of CMEA Ventures said “The alternative energy and cleantech investment area is one of the best opportunities the venture industry has seen and it looks like a long term bet.”

Why?

Because if the oil prices continue to be so volatile the governments and the private sector will look for alternative sources of energy to supply their requirements, and this is a global topic.

Igor Sill said “The shining light ahead in Silicon Valley are those well positioned software companies offering a disruptive sales model (ala SaaS) Open Source and fraud prevention providers which become more attractive to recession affected corporations.”

Why?

Because the Software as a Service (SaaS) model offer a lower price for any kind of software implementations they require, also the SaaS gives the advante to the customer of not having to acquire any kind of hardware .

I think is the opportunity for companies with this business model to show the advantages of their models and how their customer could reduce IT expenses by implementing their services.

Uncertaint future?

Bart Schachter of Blueprint Ventures said “The IPO market will re-open in 2009 as the credit and housing crises ease and the US is headed by a new administration.”

Venky Ganesan of Globespan Capital Partners said “To paraphrase Dickens, It’s the best of times and it’s the worst of times. If you consider the cocktail mix of the credit crunch, high commodity prices, deteriorating consumer confidence and the lack of IPO exits for the venture capital community, then it’s the worst of times. Exits are the river Nile of the venture business and I am afraid the river has been dry for too long. However, if you are an incredible entrepreneur with an innovative idea then this is the best of times. Rents are cheap, people are available and the tourists are gone. While its hard to imagine now, some day in the future the economy will boom, consumers will buy, and, gasp, even housing will go up, and if you lay the seeds of growth now, you will reap then. Be greedy when others are fearful.”

What we can conclude:

There are some venture capitalist loosing the confidence in the market, there are others willing to have IPO in 2009 so they can recover their money, but i think the problem is bigger, after the failout of the Bailout and the stocks roller coaster, example, DOW JONES (Monday loosing 777 points and tuesday winning 485 points) is giving an uncertaint environment for the economy and surely for the VC sector.

My prediction for the incoming VC index report are: 

In third quarter will be under 3 points and with a tiny recover in the fourth quarter,

why?

because many Venture Capitalist support Obama,

This was reported in the Venture Capital Midas List for 2007 at Forbes (This list is a classification for the worlwide VC industry):

"Robert Nelsen of Arch Venture Partners (Midas List No. 73) says he was a Bushie who'd never supported a Democrat--until Obama came along.

"There is huge support for Obama among VCs and also high-tech CEOs," notes Nelsen, a $4,600 Obama contributor. "Every fund raiser in Silicon Valley is sold out. Basically, Obama is the right leader at the right time."

Just remember 2 issues:
-Obama will create a New Energy Venture Capital fund with Us $10bn per year

-Obama will win the elections.