San Francisco continued to be the dominate player in the venture capital world nationwide, with 269 companies receiving $3.18 billion in venture money during the third quarter. That compares with $2.9 billion invested during the second quarter and $2.6 billion for the same time last year.

We are seeing increased strength in the venture capital market, particularly in Silicon Valley, New York and Boston. Nationwide, venture-backed companies raised 11 percent more in venture and equity funds during the third quarter than they did during the second quarter; they also saw the highest number of funds since the fourth quarter of 2008. Nationwide, a total of $8.1 billion was invested during the quarter in 806 venture capital deals.

Some particular deals of interest include:

  • The largest by far, and the second largest deal nationwide (after a $500 million investment in Beats Electronics LLC in Santa Monica, was a $361 million investment in Uber Technologies Inc., an on-demand transportation service based in San Francisco. This was a fourth-round investment by VCs that included Benchmark Capital and Google Ventures.
  • Another significant deal was a $196.5 million fifth-round financing into Palantir Technologies Inc., which provides analytical platforms for government and finance information.
  • Another later-stage round was a $55 million sixth-round financing into Lookout Inc., a San Francisco-based provider of cloud-based smartphone security by such venture firms as Accel Partners and Andreessen Horowitz.

One key event this quarter should help the venture market nationwide during the next quarter: despite the government shutdown in October, the market for initial public offerings for technology did not slow down or even stall.

The third quarter was one of the best for IPO's, with a large number of deals that raised more than $2.5 billion. Several of the recent IPOs have been home runs for many VC firms here locally (Silicon Valley), returning capital greater than the fund size. Limited partners have been waiting for many years to see the VC funds they invested in perform as expected and in some cases outperform. This should help venture capitalists raise new funds going into the rest of 2013 and help value creation.

It also means 2014 should be a strong year for venture capitalists raising new funds – especially in the Bay Area.

EQUITY FINANCINGS FOR BAY AREA VENTURE-BACKED COMPANIES*

  2 Q 2013 2 Q 2013 1 Q 2013 4 Q 2012 3 Q 2012
Number of Financing Deals 269 277 268 299 309
Amount Invested ($M) $3,187.39 $2,966.27 $2,829.07 $2,995.92 $2,643.85
 

TOP 10 DEALS IN BAY AREA

COMPANY NAME DESCRIPTION CITY ROUND TYPE RAISED ($MM) INVESTORS
Uber
Technologies Inc.
On-demand transportation service platform San Francisco Fourth Round $7361.20 Benchmark Capital, Google Ventures, TPG
Growth LLC
Palantir
Technologies Inc.
Analytical platforms for government and Palo Alto Fifth round $196.50 Undisclosed Investors
Deem Inc. Integrated e-commerce applications San Francisco Later $70.28 Undisclosed Venture Investor(s)
Practice
Fusion Inc.
Free Web-based app for electronic medical records San Francisco Sixth Round $70 Artis Ventures, Band of Angels, Deerfield
Management, Felicis Ventures, Glynn Capital
Management LLC, Goldcrest Investments,
H-Barton Co Invest Fund, Industry Ventures
LLC, Kleiner Perkins Caufield & Byers,
Morgenthaler Ventures, OrbiMed
Advisors LLC
Lookout Inc. Cloud-based smartphone security services San Francisco Sixth Round $55 Accel Partners, Andreessen Horowitz,
Deutsche Telekom, Greylock Partners, Index
Ventures, Khosla Ventures, Mithril Capital
Management LLC, Qualcomm Ventures
Flipboard Inc. Social magazine designed for mobile devices Palo Alto Third Round $50.50 Goldman Sachs Ventures, Index Ventures,
Kleiner Perkins Caufield & Byers,
Rizvi Traverse Management LLC
Quixey Inc. Search engine for mobile applications Mountain View Third Round $50 Alibaba Group, Atlantic Bridge Ventures,
GGV Capital, Innovation Endeavors,
TransLink Capital, USVP Management
Company LLC, WI Harper Group
Blue Jeans
Network Inc.
Cloud-based conferencing and collaboration services Mountain View Fourth Round $50 Accel Partners, Battery Ventures, New
Enterprise Associates, Norwest Venture
Partners
Zuora Inc. On-demand subscription billing and recurring payment solutions San Mateo Fifth round $50 Benchmark Capital, Greylock Partners,
Index Ventures, Individual Investors, Next
World Capital, Northgate LLC, Redpoint
Ventures, Shasta Ventures, Tenaya Capital
Inc., Vulcan Capital
Mobile Iron Inc. Multi-operating system smartphone management solutions Mountain View Fifth round $50 Foundation Capital, Institutional Venture
Partners, Northgate LLC, Norwest Venture
Partners, Sequoia Capital, SingTel Innov8
Pte Ltd., Storm Ventures LLC, UMC Capital
 

*Equity financings include cash investments by professional venture capital firms, corporations, other private equity firms, and individuals into companies that have received at least one round of venture funding.

The content of Venture Capital Report is compiled from data and sources believed to be reliable, but is not guaranteed as to accuracy or completeness. Opinions expressed are those of the authors or the interviewees and are not necessarily the opinions of City National Bank. This publication is intended to be a source of general information regarding subject matters of interest to our clients. The effectiveness of the advice or suggestions presented, if any, will depend on the reader's situation and are for the reader to determine. If investments are discussed, the discussion should not be considered or relied upon as specific investment advice directed to the reader's specific investment objectives, nor should any discussion of specific securities be taken as a solicitation or recommendation for any reader to buy or sell such securities. City National Bank (and its clients or associated persons) may at times have positions in securities and investments discussed from time to time in this publication and may make additional purchases or sales inconsistent with the discussion. City National Bank, as a matter of policy, does not give tax, accounting, regulatory or legal advice. Rules and regulations in the areas of law, tax and accounting are subject to change and open to varying interpretations. The reader is encouraged to consult his or her own tax and legal adviser.