The University of San Francisco Silicon Valley Venture Capitalist Confidence Index released today came in at 4.05 on a 5 point scale for the third quarter of 2004. This number is slightly down from the first and second quarters when it came in at 4.3 and 4.1 respectively, but still suggests a high level of Bay Area financings and entrepreneurial activity in the coming months.

The USF index measures and reports the opinions of professional venture capitalists in their estimation of the high growth venture entrepreneurial environment in the San Francisco Bay Area over the next six to 18 months. The third quarter results are based on an October 2004 survey of 50 San Francisco Bay Area venture capitalists.

Mark Cannice, co-creator of the USF index, attributes this quarter’s investor confidence to the assessment of real business factors including: strong M&A momentum, low overhead costs, increasing number of start-up activities, and the perception that more Asian, especially Chinese, companies are coming to the United States to seek capital, while many mid-cap U.S. companies are seeking opportunities in Asian markets.

However, compared with the first two quarters of 2004, some venture capitalists are less upbeat about the economy due to its slow recovery, uncertainty around the presidential election, cautious corporate spending, and concerns among large companies about doing business with start-ups. The first quarter brought expectations of improvement in the initial public offering market and the macroeconomic picture. Those have faded through the summer as the economy hit a “soft patch.”

“While there does seem to be a lot of activity, the economy also feels dampened while people wait to adjust accordingly based on their political views and the outcome (of the presidential election) in November,” said Brendan Richardson of Vision Capital.

Similarly, Mohanjit Jolly of Garage Technology Ventures offered, “Essentially, the spending environment —and I am speaking purely from an IT standpoint— is still fairly tight, with concerns among large enterprises about doing business with upstarts.”

VC companies that participated in the current survey include:

3I                             J. Sanford Miller
Acorn Campus                   T. Chester Wang
Asset Management Company     Skip Fleshman
August Capital                   David Hornik
BA Venture Partners         Eric Sigler
BA Venture Partners         Sharon Wienbar
Bay Partners                   Dino Vendetti
Canaan Partners                   Wende Hutton
Claremont Creek Ventures     Randy Hawks
Compass Technology Partners     David G. Arscott
Cresendo Ventures         Andy Brooks
Crosslink Capital, Inc.         Dave Epstein
De Novo Ventures         Joe Mandato
Diamondhead Ventures         Peter Wolken
Dominion Ventures         Michael K. Lee
Dynasty Capital Services     Randolph L. Tom
East Peak Advisors         David A. DeRuff
El Dorado Ventures         Charles Beeler
Garage Technology Ventures     Mohanjit Jolly
Geneva Venture Partners         Robert Troy
Globespan Capital Partners     Venky Ganesan
Granite Ventures         Standish O'Grady
Institutional Venture Partners Steve J. Harrick
Mayfield                   Thomas D. Fountain
Morgenthaler Ventures         Bob Pavey
New Enterprise Associates     Stewart Alsop
Nokia Venture Partners         Kwan Yoon
Novus Ventures, L.P.         Henry Wong
NTH Power Techonologies         Bryant J. Tong
Onset Ventures                   Shomit Ghose
SBV Venture Partners         Graham Burnette
SBV Venture Partners         Jacques Vallee
Selby Ventures Partners         Robert C. Marshall
Selby Ventures Partners         Marco DeMiroz
Sigma Partners                   Gregory Gretsch
Skyline Ventures         Stephen Sullivan
TechFund Capital         Kurt Keilhacker
U.S. Venture Partners         Casper de Clercq
U.S. Venture Partners         Anonymous
Vision Capital                   Brendan Richardson
Vision Capital                   Dag Syrrist
9 respondents wished to remain anonymous   

The index, published every quarter, is co-authored by Mark Cannice and Roger Chen, professors at the USF School of Business and Management. Please find the full report at: http://www.usfca.edu/sobam/nvc/cindex_3_2004.htm

For more information, media may reach Mark Cannice (e-mail protected from spam bots) or at cell: (650) 483-6846, or w: (415) 422-6785; or Roger Chen (e-mail protected from spam bots) or at w: (415) 422-6546 or cell: (650) 269-7723. Otherwise, reach Monica Leifer, USF assistant director of media relations, at (415) 422-2697.