Rod Werner
Senior Vice President
Managing Director
City National Technology Group
(650) 812-8311
Rod.Werner@cnb.com

The number of Silicon Valley companies getting venture capital funding fell for a third straight quarter, a continuing cool-down from last year’s heady pace.

But the region, including San Francisco and the Bay Area, remained the No. 1 destination for venture capital overall in the first quarter, capturing 45 percent of the national total. San Francisco firms alone took in 19 percent of the U.S. total, reflecting the city’s meteoric rise as a center of new technology.

The region as a whole saw 284 companies get VC funding in the first quarter, down 10 percent from 316 in the same quarter of 2014 and down 16 percent from 338 in the fourth quarter, according to data firm CB Insights.

VC dollars invested in the region, however, were up slightly from a year ago — $5.05 billion versus $4.95 billion — though down 13 percent from the fourth quarter.

Nationwide, 805 companies got $11.3 billion in venture money last quarter, compared with 918 companies and $10.2 billion a year earlier, CB Insights said. The recent peak was 1,038 deals worth $13.7 billion in the second quarter of last year.

Rod Werner, head of City National’s Technology Group in Palo Alto, said the decline in the number of private Silicon Valley firms getting venture funding last quarter in part reflects the huge amounts that were raised in 2013 and 2014. For some startups, “The need to tap the market for funding is less because they raised so much in the last few years,” he said.

Another factor is how venture money is measured: CB Insights counts only funds from investment firms whose primary business is venture capital. It doesn’t include hedge funds, mutual funds and other firms that make venture investments as a sideline. Those firms have ramped up VC investing recently as the allure of tech startups has grown.

That money has helped drive up valuations of many Bay Area private companies, causing some VC investors to shop elsewhere for opportunities, Werner said. “With valuations so high in California, they’re looking outside the area,” he said.

Even so, VCs found plenty to like in the region last quarter. The single biggest financing was a $367 million Series G infusion for San Francisco-based social networking site Pinterest. The deal illustrated the trend of many young companies delaying going public in favor of continued reliance on private financing, Werner said.

Although tech is the Bay Area’s mainstay, a San Francisco financial services startup ranked second among the region’s top venture deals last quarter. Social Finance, or SoFi, raised $200 million in Series D funding. The three-year-old lender specializes in student-loan refinance.

Another big chunk of capital went to Nextdoor, also in San Francisco. The five-year-old company got $110 million in Series D funds to further expand its social networks linking people in neighborhoods.

EQUITY FINANCINGS FOR SILICON VALLEY VENTURE-BACKED COMPANIES

  1 Q 2015 4 Q 2014 3 Q 2014 2 Q 2014 1 Q 2014
Number of Financing Deals 284 338 366 380 316
Amount Invested ($MM) $5,051.4 $5,803.6 $4,859.2 $7,483.4 $4,949.3

TOP 10 DEALS IN SILICON VALLEY

COMPANY NAME DESCRIPTION CITY ROUND TYPE RAISED ($MM) INVESTORS
Pinterest Online pinboard to discover ideas for projects and Interests San Francisco Series G $367.1 Bessemer Venture Partners, Andreessen Horowitz
Social Finance Platform for lending to students San Francisco Series D $200 Third Point, Wellington Management, Institutional Venture Partners
Accela Developer of software solutions connecting citizens and government San Ramon Series E $143 J.P. Morgan Partners, ABRY Partners, Landmark Partners, Karlani Capital
Zuora Provider of subscription commerce and billing service Foster City Series F $115 Vulcan Capital, Benchmark Capital, Shasta Ventures, Passport Capital, Index Ventures, Greylock Partners, Redpoint Ventures, Marc Benioff, Dave Duffield, BlackRock, Wellington Management, Next World Capital, Premji Invest
21 Inc. Stealth bitcoin company San Francisco Series A-II $111 Khosla Ventures, Mark Pincus, RRE Ventures, Peter Thiel, Andreessen Horowitz, Max Levchin, Qualcomm Ventures, Drew Houston, Data Collective, Jeff Skoll, Dara Khosrowshahi, Yuan Capital
FinancialForce.com ERP for Salesforce San Francisco Series D $110 Technology Crossover Ventures, Salesforce Ventures
Nextdoor Private social network for neighborhoods San Francisco Series D $110 Kleiner Perkins Caufield & Byers, Insight Venture Partners, Benchmark Capital, Shasta Ventures, Meritech Capital Partners, Tiger Global Management, Greylock Partners, Redpoint Ventures, Comcast Ventures, Coatue Management
Oportun Financial services company aiming to help Hispanic customers build credit in the United States Redwood City Series G $90 Fidelity Investments, Institutional Venture Partners
Allergen Research Corporation Develops treatments for food allergies San Mateo Series B $80.0 Palo Alto Investors, Aisling Capital, Adage Capital Management, Fidelity Investments, RA Capital Management, Foresite Capital Management
Cyanogen Maker of the custom built CYANOGEN operating system built on Android Palo Alto Series C $80 Benchmark Capital, Index Ventures, Redpoint Ventures, Vivi Nevo, Tencent, Andreessen Horowitz, Access Industries, Qualcomm Ventures, Premji Invest, Telefonica Ventures, Twitter Ventures, Smartfren Telecom, Rupert Murdoch, Santander Innoventures Fund

 

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