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Will a Facebook IPO Trigger a New Wave in Business?

Venture capitalists can be a bipolar lot. Elation is often followed by depression followed by another emotional high. This quarter’s Silicon Valley Venture Capitalist Index declined for the third consecutive quarter, landing at a 3.27 out of 5. Yet, the outlook may not be as dire as this index may imply.

The quarterly Silicon Valley Venture Capitalist Confidence Index (Bloomberg ticker symbol: SVVCCI), based on a December 2011 survey of 30 San Francisco Bay Area venture capitalists, registered 3.27 on a 5-point scale (with 5 indicating high confidence and 1 indicating low confidence). This quarter’s index, conducted by University of San Francisco Professor Mark V. Cannice, PhD., saw a drop from the previous quarter’s 3.41, marks a third consecutive quarter of an overall decline. The index measures and 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.

Yet, the outlook may not be as dire as this index may imply.

The long expected Facebook IPO could be a high-water mark for the economy’s changing fortune’s if it proves, as expected, to increase the liquidity of the markets for IPOs waiting in the wings. There are numerous venture funds and PE firms holding their breath waiting for the right moment to take some of their holdings public and cash out of their investments. It could signal a momentous boost for capital markets in general if investors see the forthcoming Facebook deal as the opening chorus of a big operatic movement in launching a new wave of emerging companies. The Facebook deal, which could raise as much as $10 billion and value the social network concern as much as $75 billion could provide a much needed boost not only for other IPOs but for the exit strategies of VCs generally.

Facebook filed with the SEC yesterday, and under one scenario could target its IPO as early as sometime during April and June. The Wall Street Journal reports that a $10 billion Facebook offering would rank fourth for U.S. companies behind Visa, GM AT&T Wireless. It would push Facebook into the top ranked Internet offering, replacing Google which raised almost $2 billion in 2004. Even dour VCs in San Francisco would have to take notice.

Read: Silicon Valley Venture Capitalist Confidence Index

About J.P. Donlon

J.P. Donlon
J.P. Donlon is Editor Emeritus of Chief Executive magazine.