Silicon Valley Venture Capitalist Confidence Index

(Bloomberg ticker symbol: USFSVVCI) Second Quarter 2004

(Release date July 22 2004)

Mark V. Cannice, Ph.D. University of San Francisco

The quarterly Silicon Valley Venture Capitalist Confidence Index is based on a survey of San Francisco Bay Area/Silicon Valley Venture Capitalists. Founded by Professor Mark Cannice and Professor Roger Chen of the University of San Francisco School of Business and Management, the Index surveys 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 6 18 months. In developing this confidence index of professional venture capital investors, we hope to provide a leading indicator of investment in new high growth businesses in the San Francisco Bay Area. We expect that this forward-looking indicator of Bay Area new venture investment and high-growth entrepreneurial activity will also act as a fair proxy for new venture investment in the U.S., as the San Francisco Bay Area is the largest source of venture capital in the nation. The Silicon Valley Venture Capital Confidence Index for the second quarter of 2004, based on a July 2004 survey of 37 San Francisco Bay Area Venture Capitalists, came in at 4.1 on a 5 point scale (with 5 indicating high confidence and 1 indicating low confidence), and suggests a continued strong level of Bay Area venture financings and entrepreneurial activity in the coming months. The 2nd Quarter Index Level is down slightly from the previous quarter level which was 4.3 on a 5 point scale. All of the respondents names and firms are listed below, save those that wished to remain anonymous. Most of the responding venture capitalists also gave an assessment as to their degree of confidence in upcoming venture investment. We provide some of their comments in the following. Prashant Shah, principal with Hummer Winblad Venture Partners, said his positive rating was based on, a combination of CIO budgets opening up and IPO's coming back to life. Mohanjit Jolly, managing director with Garage Technology Ventures, offered several reasons for high confidence, among them that, .. there is still plenty of venture capital around that had not been put to work over the past 2-3 years. Now, the LPs and the GPs are anxious to put that to work. Dave Epstein, partner with CrossLink Capital, echoed this sentiment, saying, ..there is still a lot of money available, and many funds are getting ready for a new raise and want some exciting companies in that portfolio, and others just completed raises and are ready for action. Bryant Tong, managing director with Nth Power, added, ..we are seeing continued signs of market improvements such as greater investor syndicate interest, level valuations . and a general sense of optimism for the IPO markets opening up.... Elaine Bailey, general partner with Novus Ventures, indicated that her positive rating was due to the convergence of many factors. Among those factors she includes: an increase in the number of deals that are now being done, a funds willingness to work with a troubled company rather than kill it, and an increase in the number of new syndicates that have formed. Dr. Steve Sullivan, partner with Skyline Ventures stated, The quality and number of life science investment opportunities continues to amaze... However, Barbara Santry, general partner with

Capstone Ventures, expressed caution, citing a sluggish IPO market. We expect it may be this recent IPO Market sluggishness (or at least an IPO market and after-market that is somewhat less than expectations in some sectors), that accounts, in part, for the slight decrease in investment optimism from last quarter. Eric Buatois, managing director of Sofinnova Ventures, provided a further compelling analysis, stating, the overall enterprise customers and carriers, are buying, helping start-ups to win new business. This uptrend on the order side is making VCs more active on financing companies having revenues traction. The increased pre-money for revenue generating companies is motivating VCs to go back and invest in early stage, typically series A companies. Finally, Venky Ganesan, of Globespan Capital Partners, commented that ..a combination of serious entrepreneurs (tourists have gone home), improving economy and higher degree of venture funding is going to create some very exciting entrepreneurial companies. The Bay area remains the best place to build a high growth company. Primarily positive comments from the venture capitalists surveyed indicate a continued upbeat sentiment for venture capital investment in the coming months and bodes well for a continued growth in entrepreneurial activity and new company formation in the San Francisco Bay Area for the remainder of 2004.

Table 1 Participating Venture Capitalists in the 2004 2nd Quarter Confidence Index Survey Participant Barbara Santry Bob Pavey Brendan Richardson Bryant Tong Charlie Rice Dave Messner David Epstein David Hornik Dino Vendetti Elaine Bailey Eric Buatois Fred Dotzler Graham Burnette Ian Patrick Sobieski Igor Sill Jim Marshall Joe Mandato John Borchers Kwan Yoon Mohanjit Jolly Peter Wolken Prashant Shah Randolph L. Tom Company Capstone Ventures Morgenthaler Vision Capital Nthpower East Peak Advisors Amsterdam Pacific Securities Crosslink Capital August Capital Bay Partners Novus Ventures Sofinnova Ventures DeNovo Ventures SBV Ventures Band of Angels Geneva Venture Partners Selby Ventures DeNovo Ventures Cresendo Ventures Nokia Ventures Garage Technology Ventures Diamond Head Ventures Hummer Winblad Venture Partners Dynasty Capital Services

Robert Troy Shomit Ghose Skip Fleshman Steve Harrick Steve Sullivan Stewart Alsop Venky Ganesan Anonymous Anonymous Anonymous Anonymous Anonymous Anonymous Anonymous

Geneva Venture Partners Onset Ventures Asset Management Company Institutional Venture Partners Skyline Ventures New Enterprise Associates Globespan Capital Partners

Look for the 2004 3rd Quarter Silicon Valley Venture Capitalist Confidence Index in October. Venture Capitalists that wish to participate in the Index Survey or become involved with the USF Entrepreneurship Program should contact Professor Mark Cannice at Cannice@usfca.edu. Please find more information on the University of San Francisco School of Business and Management Entrepreneurship Program (rated Top Tier by Entrepreneur Magazine 2004) and its International Business Plan Competition at: http://www.EntrepreneurshipProgram.org.

Mark V. Cannice, Ph.D. is an Associate Professor of Entrepreneurship and the Director of the USF Entrepreneurship Program (Cannice@usfca.edu). Roger Chen, Ph.D. is an Associate Professor of Management and Co-director of the Entrepreneurship Program Research Initiative at the University of San Francisco (Chenr@usfca.edu). (Webmasters are welcome to link to this page with courtesy notification to Cannice@usfca.edu. To post this report on your website, please request permission by email to Cannice@usfca.edu. When citing the index, please refer to it as the Silicon Valley Venture Capitalist Confidence Index, and associated Quarter/Year. Thanks!

Copyright 2004 2007: Mark V. Cannice, Ph.D. All rights reserved.