VC Confidence Works Toward Pre-Recession Level

Venture capitalists are getting an improved sense of confidence when it comes to making exits, but that is a leading indicator for fundraising—that is to say, the VC industry is taking baby-steps toward a good mood.

In the fourth quarter of 2010, according to the Silicon Valley Venture Capitalist Confidence Index, assembled by University of San Francisco professor Mark V. Cannice, respondents rated their expectations for the asset class to be a 3.75 out of five possible points, marking the best quarterly reception for VCs’ prospects since early 2008, prior to the recession’s onset. The fourth quarter of 2010 registered comments from about three dozen professionals from varying venture capital firms; the most recent figures register slightly higher than third quarter numbers: 3.70 out of five points.

“The exit environment for venture-backed companies continues to improve,” Allegis Capital founder Bob Ackerman said in the VC survey.

In fact—save a 2010 second quarter confidence plunge that coincided with the May flash crash—VCs’ optimism has been on the rise from the first quarter of 2009, forward.

Cannice said that M&A exits being driven by increasingly acquisitive strategics has been responsible for breathing life back into VCs’ expectations. Further, he predicted that, following a more robust 2010 than expected, the IPO market will continue to present some opportunities for exiting VCs.

“Fundraising is going to lag” behind exits, Cannice pointed out. “We have probably hit a bottom, or close to a bottom, for fundraising.”