Silicon Valley confidence soars to highest since 2007

The future looks bright. That's the message from a law firm that has represented tech companies ranging from Apple to Oracle.

In a recently released survey of 122 Silicon Valley startups conducted by law firm Fenwick & West, valuations were up for Valley startups, with 67% raising money based on higher valuations than in their last round of financing (this is known as an "up round" of financing). Software and internet/digital media companies were most likely to see increased valuations, according to the report.

This compares to 16% of Valley startups that experienced "down rounds" in the first quarter of 2011.

This spread-67% of up rounds versus 16% of down rounds-is the largest since 2008, during the US financial meltdown.

Valuations are up for Silicon Valley start-ups. Vasily Fedosenko / Reuters

"The venture-capital environment really feels like it has fully recovered from the crash of the financial markets," Fenwick & West attorney and study co-authorMichael Patrick, told the Wall Street Journal.

There's also been a long-awaited increase in investment to venture capital funds, with nearly $8 billion committed to 25 US funds in the first quarter of 2011 alone, according to Dow Jones VentureSource. (Only about $55 billion had been invested in VCs in the past three years.)

The good news for Indian startups is that 55% of the new investments were raised by Bessemer Venture Partners, Sequoia Capital, and JP Morgan,all three of which are investing substantially in India.

Among the study's additional findings:

• There has been an anecdotal increase in early stage companies receiving significant funding from angel investors, thus delaying a first venture capital round.

• The initial public offering (IPO) market will continue to improve, with 45 companies registered to go public at the end of the first quarter of 2011.

• The University of San Francisco's Silicon Valley Venture Capital Confidence Index reported that the confidence level of Silicon Valley venture capitalists was 3.91 on a 5-point scale, the highest since the third quarter of 2007.

Updated Date: Dec 20, 2014 03:52 AM

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