California Business Minute™

Hi, I am Tim Johnson and welcome to the California Business Minute.

Los Angeles, Orange County/San Diego and Silicon Valley all witnessed significant
reductions in venture capital activity for the 1st quarter of 2009 as did all of
the major regions in the nation according to the latest MoneyTree Report from
PricewaterhouseCoopers (PwC) and the National Venture Capital Association (NVCA).

For example, Silicon Valley companies received just $1.16 billion in venture
capital during the first quarter, the smallest amount since the second quarter
of 1997. The region saw just 173 VC deals during the period, the lowest total in nearly
13 years. "These numbers clearly demonstrate that the venture capital industry
is not immune from the current economic downturn," said Mark Heesen, president
of the NVCA. "Venture capitalists have slowed their investment pace in order to
work with existing companies that are not able to exit the venture portfolio
due to the shuttered IPO window and the weakening acquisitions market." The
local numbers reflected a national trend, in which venture capitalists invested
just $3 billion, down 47% from the prior year.

However, confidence among Silicon Valley's venture capital firms is on the
increase after a five-quarter slump, according to a report by the University
of San Francisco. The results offer a glimmer of hope that the investment market
will recover as the world economy continues to suffer the effects of recession.

The university’s Silicon Valley Venture Capitalist Confidence Index, which gauges
VC confidence on a five-point scale, registered 3.03 for Q1 2009. This was up from
2.77 in Q4 2007, which had set a five-year low.

The Confidence Index is based on a poll of San Francisco Bay Area venture
capitalists, who are asked to predict the state of the San Francisco Bay Area
investment market in the coming six to 18 months. Mark Cannice, the executive
director of the University of San Francisco Entrepreneurship Program, claims
that shifts in VC confidence precede market changes. He argues that since VC
investors work closely with private and public companies, they are good at
reading trends across the board. 

I am Tim Johnson and this has been the California Business Minute.

For further information, see www.NVCA.org  See regional data