Venture capital funding in Silicon Valley and the San Francisco Bay Area pulled back to more normal levels in the third quarter after surging in spring to peaks last seen in 2001. But the region easily retained its crown as the top U.S. destination for venture dollars.
A total of 332 companies in the area got VC funding in the quarter, down 8% from 361 in the second quarter, according to data firm CB Insights. Total dollars invested plunged 46%, to $4.33 billion from $8 billion in the previous quarter.
The second quarter venture total had been swelled by a round of huge late-stage financings for some of the biggest "sharing economy" upstarts, including San Francisco-based Uber. The taxi-alternative company got a $1.2-billion infusion in spring. "The second quarter was an anomaly," said Rod Werner, managing director of City National's Technology Group. "I don't think we'll see those numbers again anytime soon."
Nationwide, venture financing deals totaled 878 in the third quarter, down 10% from the second quarter, while the dollar amount of funding slid 30% to $9.79 billion.
Still, VC funding in the summer quarter was up from the same quarter a year earlier for the U.S. overall and for Silicon Valley, reflecting the hefty cash sums VC funds have available to invest. Nationwide, the number of deals last quarter edged up 2% from a year earlier while total dollars invested jumped 35%. In Silicon Valley, including San Francisco, the number of deals was up 4% in the quarter from a year ago and total dollars invested rose 27%. Companies in the region took in 44% of all venture funding last quarter. New York City was a distant second, with 14%.
Some of the largest Silicon Valley deals last quarter were for companies that analyze "big data" such as consumer spending trends and crime statistics. The region's top deal was a $337-million infusion for Palo Alto-based Palantir Technologies, a big-data analytics firm founded in 2004 and initially funded in part by the CIA. Two other Bay Area big-data firms also made the region's top-10 list of funding deals: Santa Clara-based DataStax and Palo Alto-based MetricStream.
On the consumer side, the home remodeling and design website Houzz, also in Palo Alto, garnered a $165-million investment last quarter. The company, founded by two Israeli emigrants in 2009, has mushroomed into one of the biggest online home-design marketplaces.
Werner noted that rising volatility in stock markets since spring has made some private companies and their backers more reluctant to go public. That has helped continue to drive late-stage financings. Just 18 U.S.-based VC-backed companies went public last quarter, down from 24 in the second quarter and 35 in the first, CB Insights said.
EQUITY FINANCINGS FOR SILICON VALLEY VENTURE-BACKED COMPANIES*
|3 Q 2014||2 Q 2014||1 Q 2014||4 Q 2013||3 Q 2013|
|Number of Financing Deals||332||361||307||271||320|
|Amount Invested ($MM)||$4332.9||$7998.9||$4871.9||$2910.4||$3409.9|
TOP 10 DEALS IN SILICON VALLEY
|COMPANY NAME||DESCRIPTION||CITY||ROUND TYPE||RAISED ($MM)||INVESTORS|
|Palantir Technologies||Big data analytics and visualization||Palo Alto||Series H - III||$336.7||Founders Fund, RRE Ventures, Undisclosed Investors|
|Houzz||Online platform for home remodeling and design||Palo Alto||Series D||$165||New Enterprise Associates, Kleiner Perkins Caufield & Byers, Sequoia Capital, T. Rowe Price, GGV Capital, Digital Sky Technologies, Oren Zeev|
|Lookout||Smartphone security software||San Francisco||Series F||$150||Khosla Ventures, Accel Partners, Goldman Sachs, Bezos Expeditions, T. Rowe Price, Index Ventures, Morgan Stanley, Andreessen Horowitz, Wellington Management, Mithril Capital Management|
|DataStax||Enterprise database technology||Santa Clara||Series E||$106||Kleiner Perkins Caufield & Byers, Lightspeed Venture Partners, Scale Venture Partners, Crosslink Capital, Meritech Capital Partners, Wasatch Advisors, DFJ Growth Fund, Cross Creek Advisors, ClearBridge Investments, Next World Capital, Comcast Ventures, Premji Invest|
|Thumbtack||Online platform for booking local services||San Francisco||Series D||$100||Sequoia Capital, Tiger Global Management, Javelin Venture Partners, Google Capital|
|Credit Karma||Online credit score monitoring||San Francisco||Growth Equity - II||$75||Tiger Global Management, Susquehanna Growth Equity, Google Capital|
|AppDynamics||Application performance management||San Francisco||Series E||$70||Kleiner Perkins Caufield & Byers, Lightspeed Venture Partners, Battery Ventures, Greylock Partners, ClearBridge Investments, Institutional Venture Partners, Sands Capital|
|MetricStream||Enterprise governance, risk, compliance, and quality management solutions||Palo Alto||Series F||$60||Kaiser Permanente Ventures, Goldman Sachs, Sageview Capital|
|Anki||Robotics and AI technologies used in toys||San Francisco||Series C||$55||JPMorgan Chase & Co., Index Ventures, Andreessen Horowitz, Two Sigma Ventures|
|Radius Intelligence||Data and insights for small businesses||San Francisco||Series C||$54.7||Founders Fund, BlueRun Ventures, Glynn Capital Management, Western Technology Investment, Formation 8, Slow Ventures, John Mack, Jared Leto, Yuan Capital|
* Quarterly tallies consist of equity rounds completed in the quarter and in which a venture capital or corporate venture firm participated in the round.
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