Senior Vice President
City National Technology Group
The second quarter saw another deluge of venture capital money flow to Silicon Valley companies, led by later-stage financings for some familiar names.
A $1.5 billion growth-equity funding deal for Airbnb, the global online lodging-rentals service, pushed total VC financing to $9.32 billion for companies in San Francisco and the Bay Area, according to data firm CB Insights. The second-quarter sum was the largest of the current venture-investing wave and kept the region by far the nation's No. 1 destination for VC money.
The dollar total was up nearly 25 percent from a year earlier; however, the number of deals declined 11 percent to 338.
The drop in deals in the region meant VC firms and other investors were writing bigger average checks than a year ago. That in part reflects their willingness to pour more capital into some of the area's largest private firms.
All 10 of the region's largest VC infusions in the quarter went to San Francisco-based businesses, further cementing the city's status as an entrepreneurial mecca.
Besides Airbnb's huge funding, ContextLogic received $500 million in Series C funding. The company operates the personalized-shopping website Wish.com.
Another $500 million, also in Series C financing, went to Zenefits, a 2-year-old firm that handles payroll, benefits and other human-resources services for small businesses.
The ongoing VC investments in Airbnb, Pinterest, Lyft and others show those firms remain in no hurry to go public. "Overall, private valuations of companies are more favorable than public market valuations," said Rod Werner, head of City National’s Technology Group in Palo Alto. That is deterring the initial public offering decision for many tech companies.
Indeed, the number of VC-backed companies nationwide that went public in the first half of 2015 fell sharply to 44 from 66 in the first half of 2014, according to Thomson Reuters and the National Venture Capital Association.
What's more, VC investors are being flooded with fresh capital from clients worldwide. VC firms raised $10.3 billion in new money in the second quarter, the most since 2007, Thomson and the NVCA say. That is fueling more talk of a bubble.
Still, "Investors everywhere are looking for growth stories, and that is naturally drawing them to U.S. entrepreneurs," Werner said.
EQUITY FINANCINGS FOR SILICON VALLEY VENTURE-BACKED COMPANIES
|2 Q 2015||1 Q 2015||4 Q 2014||3 Q 2014||2 Q 2014||2014 Total|
|Number of Financing Deals||338||284||338||366||380||1400|
|Amount Invested ($MM)||$9318.5||$5051.4||$5803.6||$4859.2||$7483.4||$23095.5|
TOP 10 DEALS IN SILICON VALLEY
|COMPANY NAME||DESCRIPTION||CITY||ROUND TYPE||RAISED ($MM)||INVESTORS|
|Airbnb||Community marketplace for people to list, discover and book housing accommodations||San Francisco||Growth Equity||$1500||Kleiner Perkins Caufield & Byers, Tiger Global Management, T. Rowe Price, General Atlantic, GGV Capital, Temasek Holdings, Wellington Management, Fidelity Investments, Hillhouse Capital Management, Horizon Ventures, China Broadband Capital, Baillie Gifford & Co.|
|ContextLogic||ContextLogic operates Wish, a social platform to discover, collect and share products with friends||San Francisco||Series C||$500||Founders Fund, GGV Capital, Digital Sky Technologies|
|Zenefits||Cloud HR automation platform||San Francisco||Series C||$500||Insight Venture Partners, Founders Fund, Khosla Ventures, TPG Growth, Fidelity Investments, Comcast Ventures, Sound Ventures|
|Affirm||Develops financial products that include a more affordable way to buy online with credit||
|Series B||$275||Lightspeed Venture Partners, Spark Capital, Khosla Ventures, Andreessen Horowitz, Jefferies & Company|
|DocuSign||Digital transaction management platform||San Francisco||Series F||$233||Bain Capital Ventures, Generation Investment Management, Wasatch Advisors, Brookside Capital, Wellington Management, ClearBridge Investments, Sands Capital, Iconiq Capital|
|Denali Therapeutics||Biotech company focused on the development of neurodegenerative disease therapies||San Francisco||Series A||$217||ARCH Venture Partners, Flagship Ventures, Fidelity Biosciences, Alaska Permanent Fund|
|Online pinboard to discover ideas for projects and interests||San Francisco||Series G - II||$186||Bessemer Venture Partners, FirstMark Capital, Goldman Sachs, SV Angel, Andreessen Horowitz, Wellington Management, Fidelity Investments, Valiant Capital Partners|
|Prosper Marketplace||Peer-to-peer lending marketplace||San Francisco||Growth Equity - II||$165||JPMorgan Chase & Co., Passport Capital, USAA, SunTrust Banks, Breyer Capital, BBVA Ventures, Neuberger Berman, Credit Suisse NEXT Investors|
|Slack Technologies||Web and mobile team communication platform||San Francisco||Series E||$160||Kleiner Perkins Caufield & Byers, Spark Capital, Google Ventures, Horizons Ventures, Accel Partners, Index Ventures, Digital Sky Technologies, Andreessen Horowitz, Institutional Venture Partners, The Social+Capital Partnership|
|Lyft||Ridesharing marketplace||San Francisco||Series E - II||$150||Icahn Enterprises, Fontinalis Partners|
|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, member FDIC. 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, accounting or legal adviser.