Is Silicon Valley dead? Not according to Venture Dollars
Silicon Valley is the most a valuable asset is no longer silicon, making computer chips, or even making technological talent to code software products. Instead, it’s capital, which has been piling up in the region since the founders of today’s founders were in diapers. It is now close to San Francisco more billionaires per capita than any other city in the world — and many have reintroduced wealth into the investment ecosystem. In other words: Silicon Valley is the capital of technology because of its capital of technology.
Recently, some investors have talked about bringing their money elsewhere. Peter Thiel announced in February that he would move his Founders Fund to Miami; Joe Lonsdale moved his venture business, 8VC, to Austin. The bay area is dead, they say. If money speaks for itself, however, it suggests the opposite.
Venture capital had a record year in 2020, and most of the investment remained in California. The pattern continues this year as well: US-based risk funds invested $ 69 billion in the first quarter of 2021, more than $ 25 billion — more than a third — of which reached Silicon Valley and the Bay Area, according to the latest Pitchbook . That number is higher than the combined three cities — New York, Boston and Los Angeles — combined, and investments in cities like Austin are more than 30 times that.
These new numbers tell the old story about venture capital. “In our data set, it’s never concentrated in the bay,” says Pitchbook analyst Kyle Stanford. This winter, when rumors surfaced about a technician fleeing California politics and running away from high living costs, Stanford wanted to declare Silicon Valley in decline. He found Between 2015 and 2020, 40 percent of the VC dollar was allocated to Bay Area companies. And with other cities pouring in more dollars lately, he still hasn’t done much because of the king of the Silicon Valley region.
By 2021, California startups continue to garner the largest investments to date. Of the 25 largest offers in the Pitchbook’s Q1 data set, 12 ended in the state. Half of the top 10 offerings were in California. And the size of these agreements is growing. In the first months of 2021, there was another “mega-round” or rounding of more than $ 100 million as in the same quarter last year. While some of these companies have brought wealth to new areas — the $ 2.65 billion F series created by automaker Rivian in Plymouth, Michigan, for example, many of the biggest rounds have been for California companies. Software manufacturer Databricks, headquartered in San Francisco, raised more than $ 1 billion in the first quarter of the year. Robinhood, the headquarters of Menlo Park, raised a whopping $ 3.4 billion round.
There are also large outflows in California. In the first quarter of 2021, the first three outlets — Roblox, Tuya Smart, and Affirm — were in Silicon Valley or San Francisco, earning more than $ 63 billion between them. In the last three years, only 20 companies have completed a $ 1 billion outflow out of the four largest ecosystems.
Silicon Valley has no absolute suffocation. Smaller rounds of VC funding are being channeled to new cities at a higher rate. In the first quarter of 2021, investors financed about 1,500 angels and a seed round – the highest total quarter since Pitchbook began tracking in 2006. The Bay Area received 14.5 percent of those rounds, which still makes it the regional leader. with a smaller gap than other types of investments. Some cities, such as Minneapolis, recorded more funding than ever before in the last quarter. Denver and Chicago have seen significant year-over-year growth in total investment, and have shown a growing interest in these start-up ecosystems.