A cautious optimism is returning to the Silicon Valley venture community, according to a new report from the University of San Francisco School of Management.

The Silicon Valley Venture Capitalist Confidence Index recorded a 3.53 on a 5-point scale for the third quarter, an increase from the previous quarter’s reading of 3.47. The index is based on a September survey of 31 venture capitalists in the San Francisco Bay Area, with five indicating high confidence for the growth potential of the start-up environment in the next six to eight months.

“Although the Index edged higher, the venture capitalists who responded to the Q3 survey pointed to concerns over stubbornly high valuations despite recent venture-backed public market disappointments such as Facebook, Zynga, and Groupon, and despite the overall performance of the venture asset class,” Dr. Mark V. Cannice, the author of the report noted in his findings.

Those “stubbornly high valuations” were reflected in investor predictions of Facebook’s opening-day closing price. Shervin Pishevar of Menlo Ventures predicted a May 18th closing price as high as $63, while angel investor Chris Dixon and First Round Capital’s Josh Kopelman predicted a close of $50 and $57, according to VentureBeat.

Meanwhile, Groupon has dipped below $4 a share on Friday. The daily deals company priced its opening day shares at $20 last November.

“The collapse of Zynga and Groupon, and the taint on the Facebook IPO, doesn’t seem to have diminished entrepreneurial enthusiasm, but it creates a drag on the investor community,” Bill Reichert of Garage Technology Ventures said in the report.

But despite lingering trepidations, venture capitalists remain bullish on Silicon Valley as a hub of tech innovation even as start-up ecosystems emerge in cities such as New York and Los Angeles.

“Silicon Valley remains the epicenter of the three most compelling market opportunities in technology, the mobile Internet, cloud computing and big data," Jafco Ventures partner Jeb Miller said in the report. “The IPO market remains open for high quality issuers...and the strategic exit environment remains healthy as legacy vendors put their cash to work acquiring innovation.”