A third quarter survey shows the first drop in Silicon Valley VC confidence in two years.

Cromwell Schubarth — Senior Technology Reporter- Silicon Valley Business Journal

Confidence among Silicon Valley venture capital investors dropped for the first time in two year in the third quarter, according to a new survey.

The report from the University of San Francisco is the latest sign of nervousness among VCs as startup valuations hit the roof and a growing number of IPOs are underperforming or being delayed.

Among the VC-backed companies that have decided to delay offerings are Los Altos-based Box and Sunnyvale-based Good Technology. Bloomberg reports that Zoosk, GoDaddy and Yodle also may wait until next year.

The survey also comes after various reports indicated strong but slowing venture funding in the third quarter.

The survey managed by Prof. Mark Cannice asked 33 VCs in the region to rank their confidence on a five-point scale, with one being low and five being high.

The third quarter index came in at 3.89, which is still relatively high, but is down from the 4.02 registered in the second quarter. It is the first drop recorded since early 2012.

“The break in the upward trend could indicate slowing momentum going forward as the VC confidence reading is future oriented,” Cannice wrote in his report.

Some prominent VCs, including Bill Gurley of Benchmark and Marc Andreessen of Andreessen Horowitz, have publicly warned startups to be careful not to burn through too much of their cash at this time.

One of the VCs in the survey who is growing more cautious is Robert Ackerman of Allegis Capital.

“While the engine of innovation is running at full speed, there is considerable risk of overheating, particularly in consumer sectors,” he said. “The excess of capital available to these companies is inflating both valuations and their wage costs. The laws of gravity remain universal and, at some point, we can expect to see a reconciliation between hype and hope.”

Jon Soberg of Expansive Ventures said, “The ‘bubble’ talk has grown louder, especially discussion about high valuations and burn rates. I expect VCs will be more conservative in the coming months and will fulfill the predictions of things slowing down. I still see great innovation and opportunities, and I expect that we will continue to see great companies being built and scaled, but possibly with a little lower valuations.”

An interesting twist may be that as venture-backed companies wait longer to exit through an IPO or acquisition, they become more vulnerable to shifting global macro-economic factors.

“With market demand lagging in China and in most of Europe, many companies are finding it difficult to forecast 2015 international sales,” Kurt Keilhacker of Techfund Capital said. “As a result, many U.S. companies are forecasting modest growth with the headwinds of softening demand internationally and an appreciating U.S. dollar.”

Despite signs of weakening exits, a number of the VCs in the survey remain confident.

Venky Ganesan of Menlo Ventures said, “The major trends driving entrepreneurial growth remain intact — mobile and social for consumers; cloud and Big Data for enterprises. The world we live in is being refashioned by these trends and we are in the second inning of the game. There will be some short term perturbations and some of the excesses we see in certain sectors will get curtailed, but the long term secular trend remains intact.”

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Cromwell Schubarth is the Senior Technology Reporter at the Silicon Valley Business Journal.