Halftime Report: Investment in Silicon Valley Has Rebounded From 2015’s Low
By John Melville and Janine Kaiser
Mid-year Venture Capital Levels Rise After 2015 Dropoff
After rising in the first half of 2015, venture capital investment dropped substantially over the remainder of the year in Silicon Valley. However, this trend did not continue in the first half of 2016, as venture investments into Silicon Valley-based firms (including San Francisco) ended higher than their Q4 2015 level.
Tempering this news is the fact that the rebound was modest; Silicon Valley’s VC levels remained below last year’s high, and according to CB Insights data, Q2 2016 seems to have been lower than the Q1 2016 investment. On this last point, not all the second quarter numbers have been recorded, as several late-stage investments did not publically disclose valuations, including Scoot Networks, August Home, Lob.com, Qnovo and Droom Technology.
So, we will know in the coming months if there really was a Q2 dip, whether it was the start of a downward trend or just a one-quarter hiccup in what otherwise is a rebound from 2015’s low point. What we do know is that VC investment is currently well below the level recorded at this time last year—and that it would take substantial gains in the second half of 2016 to match 2015’s annual total.
Silicon Valley Well Ahead of and Not Losing Ground to Top Innovation Regions
At the same time, Silicon Valley performed better than most comparison regions. Boston and New York City experienced declines in VC investment in the first half of 2016, while Austin and Seattle posted only small gains. Southern California saw a sharp increase in venture investment in the second quarter of 2016, driven in part by a $200M investment in San Diego-based Human Longevity, the second largest VC investment in California in Q2 2016. But let’s be clear: Silicon Valley remains well ahead of these regions in overall VC investment.
VC Fundraising Getting Stronger Nationally
What does the VC pipeline look like? According to the National Venture Capital Association, in Q1 2016 fundraising among venture capital firms in the U.S. was the highest in a decade, at $14B. Fundraising in the first half of 2016 was 24 percent higher than the first half of 2015.
So, what does this halftime report tell you? Share with us what you think is happening in the Valley, and what is on the horizon.
John Melville and Janine Kaiser are Co-CEO and Senior Consultant, respectively, and Collaborative Economics.