Senior Vice President
City National Technology Group
Venture capital funding for start-ups in the Silicon Valley region slowed sharply in the third quarter after a second-quarter surge, amid a steep drop in big deals for companies in San Francisco.
Businesses in the Bay Area, including Silicon Valley and San Francisco, took in a total of $6.93 billion in venture money last quarter―as usual, the lion's share of all U.S. venture investment, according to data firm CB Insights. The total was down 26% from $9.32 billion in the second quarter, which stands as the high-water mark in the venture funding wave of the last few years.
The dollar total of Bay Area financings last quarter still was up 43% from the third quarter of 2014. But the number of deals, at 308, was off 16% from a year earlier and down 9% from the second quarter.
"We continue to see plenty of liquidity from VCs, private equity firms and corporations looking to invest in fast-growing technology companies in the Bay Area," said Rod Werner, head of City National’s Technology Group in Palo Alto.
In a shift, just four companies located in San Francisco made the list of the 10 biggest Bay Area venture investments last quarter. The rest were based in the Valley or elsewhere in the region. That was a major turnabout from the second quarter, when the region's 10 largest investments all went to companies in the hot San Francisco market.
The region's single biggest funding last quarter was a $1 billion Series E investment in SoFi, a four-year-old San Francisco firm that refinances student loans and also lends for other purposes. SoFi, short for Social Finance, targets young professionals and aims to charge less than other lenders while also providing services such as career counseling for borrowers. SoFi is one of a growing number of new Bay Area-based online lenders, a group that includes Prosper Marketplace and Affirm.
Besides SoFi, just one other consumer-oriented Web business made the region's top-10 list: San Francisco-based Thumbtack. The firm, which supplies consumers with information on local professional services (such as home remodelers), raised $125 million in Series E funding.
By contrast, six of the area's top-10 venture deals last quarter were in one of the Valley's backbone sectors: tech services for businesses. The deals included a $125-million Series F infusion for data-storage firm Tintri and a $120-million Series G funding for cybersecurity provider Tanium.
In the health care field, South San Francisco-based Stemcentrx cemented its position as one of the region's most exciting―and controversial―biotech start-ups. The company got $250 million in venture funding last quarter, on top of prior funding from investors including Silicon Valley luminary Peter Thiel. Stemcentrx is focused on the idea that cancer is caused by the body's specialized stem cells, a concept other researchers reject.
EQUITY FINANCINGS FOR SILICON VALLEY VENTURE-BACKED COMPANIES
|3 Q 2015||2 Q 2015||1 Q 2015||4 Q 2014||3 Q 2014|
|Number of Financing Deals||308||338||284||338||366|
|Amount Invested ($MM)||$6928.4||$9318.5||$5051.4||$5803.6||$4859.2|
TOP 10 DEALS IN SILICON VALLEY
|COMPANY NAME||DESCRIPTION||CITY||ROUND TYPE||RAISED ($MM)||INVESTORS|
|Social Finance||Student lending platform||San Francisco||Series E||$1,000||DCM Ventures, Baseline Ventures, Third Point, Wellington Management, Softbank Corp., Institutional Venture Partners, Renren Lianhe Holdings|
|Stemcentrx||Developing cancer therapies and diagnostics||South San Francisco||Venture Capital||$250||Founders Fund, Sequoia Capital, Fidelity Investments|
|GitHub||Online codebase management tools||San Francisco||Series B||$250||Sequoia Capital, Andreessen Horowitz, Institutional Venture Partners, Thrive Capital|
|Medallia||Customer experience software and services||Palo Alto||Series E||$150||Sequoia Capital|
|Auris Surgical Robotics||Developing a robotic microsurgical system for ophthalmic surgery||San Carlos||Growth Equity - II||$149.55||Lux Capital, NaviMed Capital, Mithril Capital Management|
|Thumbtack||Marketplace for local services||San Francisco||Series E||$125||Sequoia Capital, Tiger Global Management, Google Capital, Baillie Gifford & Co.|
|Tintri||Virtualization infrastructure and storage||Mountain View||Series F||$125||New Enterprise Associates, Insight Venture Partners, Menlo Ventures, Lightspeed Venture Partners, Silver Lake Partners|
|Tanium||Endpoint visibility and control technology related to cybersecurity||Emeryville||Series G||$120||Andreessen Horowitz, TPG Growth, Institutional Venture Partners|
|CloudFlare||Internet application security via cloud-based firewalls, load balancing and more||San Francisco||Series D||$110||New Enterprise Associates, Union Square Ventures, Venrock, Microsoft, Fidelity Investments, Qualcomm Ventures, Greenspring Associates, Pelion Venture Partners, Baidu, Google Capital|
|Apttus||Sales cycle management platform||San Mateo||Series C||$108||Kuwait Investment Authority, K1 Capital, Iconiq Capital, Salesforce Ventures|
|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.