The Silicon Valley Venture Capitalist Confidence Index for the second quarter of 2011, based on aJune 2011survey of 35 Bay Area venture capitalists, registered3.66on a5 point scale(with 5 indicating high confidence and 1 indicating low confidence). This quarter's index dropped significantly from the previous quarter's reading of 3.91 ending the upward momentum in confidence since its low point in Q4 2008.

This is the 30th consecutive quarterly survey and report and, thus, provides unique quantitative and qualitative trend data and analysis on the confidence of Silicon Valley VCs in the future high-growth entrepreneurial environment.Mark V. Cannice, professor of entrepreneurship and innovation at theUniversity of San Francisco(USF) School of Management, authors the report each quarter.

In his report Cannice writes, "While many of the participating venture capitalists continued to be confident in the future prospects of the high-growth entrepreneurial environment, an increasing number found reason for caution due to worrisome macro economic trends, seemingly inflated valuations, uneven capital availability, and regulatory constraints in the life science arena."For example,Bob Paveyof Morgenthaler Ventures explained, "We are still in the early stages of an upturn...but there will continue to be many downs as well as ups. Some of the downs will be painful." Similarly,Bob Ackermanof Allegis Capital contended, "The venture market is still regaining its footing," adding, "A capital shortage in very early stage investing is overshadowedbyexuberance in the social media sector." However,Deepak Kamraof Canaan Partners stated, "Despite recent volatility, the exit window is still open for M&A and IPO's, and will probably be open for quality companies for some time."

Dr. Cannice concluded that while a general up-cycle in the venture environment persists, there is a risk that politically induced economic uncertainty in the U.S. andEuropecould dry up liquidity in the financial markets and among corporate acquirers that could constrain the currently vibrant exit market.