Senior Vice President
City National Technology Group
Silicon Valley closed out a roaring year for venture capital investing with a surge in fourth-quarter financings, led by alternative taxi firm Uber.
Companies in the San Francisco Bay Area, including the Valley, took in $5.7 billion in venture funding last quarter, up 33% from the third quarter and nearly double the level of the fourth quarter of 2013, according to CB Insights.
The number of funding deals totaled 320 in the latest quarter, off 4% from the summer quarter but up 18% from 271 a year earlier.
As usual, the Bay Area took the biggest slice of financing nationwide, in the strongest year for venture capital funding since the end of the dot-com boom in 2001. Total U.S. venture funding came to $47.3 billion across 3,617 deals in 2014, up from $29.2 billion and 3,354 deals in 2013.
The Bay Area accounted for nearly half of the U.S. venture dollar total, at $23 billion, and a little more than one-third of the deal total. The city of San Francisco remains the epicenter of the new venture boom: A total of 584 companies there got funding last year. New York City was a distant No. 2, with 398.
Concerns continue to be raised about the lofty valuations of many venture-funded companies, notes Rod Werner, head of City National’s Technology Group in Palo Alto. Although “the fundamentals of many private companies look solid,” he said, “the question is whether we will see an adjustment in valuations in 2015.”
Still, Werner said, global investors see U.S. startups as one of the most promising investment sectors in a slow-growing world economy. “They’re all looking for growth stories,” he said.
Uber took the top spot in Bay Area financings last quarter, with a $1.2 billion Series E investment. Uber is a leading example of the trend for new companies to stay private for longer, building the business via venture funding rather than going public via stock offerings.
Likewise, mobile payments provider Square got a $150 million Series E infusion as the San Francisco firm battles rivals including PayPal and ApplePay.
In a new twist on a business that has seen many players come and go over the years, grocery delivery firm Instacart took in $210 million in Series C funding from a group led by VC firm Kleiner, Perkins. San Francisco-based Instacart is going nationwide with its promise of picking out and delivering your groceries within an hour.
EQUITY FINANCINGS FOR SILICON VALLEY VENTURE-BACKED COMPANIES*
|4 Q 2014||3 Q 2014||2 Q 2014||1 Q 2014||4 Q 2013|
|Number of Financing Deals||320||332||361||307||271|
|Amount Invested ($MM)||$5,749.9||$4,332.9||$7,998.9||$4,871.9||$2,910.4|
TOP 10 DEALS IN SILICON VALLEY
|COMPANY NAME||DESCRIPTION||CITY||ROUND TYPE||RAISED ($MM)||INVESTORS|
|Uber||Mobile on-demand car service application||San Francisco||Series E||$1,200.0||New Enterprise Associates, Lone Pine Capital, Qatar Investment Authority, Valiant Capital Partners, Iconiq Capital, Glade Brook Capital|
|SurveyMonkey||Online survey solutions provider||Palo Alto||Private Equity - II||$250.0||Tiger Global Management, T. Rowe Price, Morgan Stanley, Fidelity Investments, Laurel Crown Partners, The Social+Capital Partnership, Ryan Finley, Chris Finley, Iconiq Capital, Dave Goldberg, Google Capital, Baillie Gifford & Co.|
|Instacart||Online and mobile grocery shopping and delivery||San Francisco||Series C||$210.0||Kleiner Perkins Caufield & Byers, Sequoia Capital, Andreessen Horowitz|
|Square||Payments and PoS systems provider||San Francisco||Series E||$150.0||Goldman Sachs, GIC Special Investments, Rizvi Traverse Management|
|Slack Technologies||Team communication and chat platform||San Francisco||Series D||$120.0||Kleiner Perkins Caufield & Byers, Google Ventures, Accel Partners, Andreessen Horowitz, David Sacks, Jeremy Stoppelman, Anthony Casalena, The Social+Capital Partnership, Patrick Collison, John Collison, Om Malik|
|InVitae||Genetic information and diagnostics||San Francisco||Series F||$120.0||OrbiMed Advisors, Deerfield Management, Genesys Capital, Redmile Group, Wellington Management, The Broe Group, Thomas McNerney & Partners, Decheng Capital, Genomic Health, Casdin Capital, Rock Springs Capital, Randy Scott|
|Sentient Technologies||Big data and distributed AI for businesses||San Francisco||Series C||$103.5||Horizons Ventures, Tata Communications, Access Industries|
|Mirantis||OpenStack software company||Mountain View||Series B||$100.0||Insight Venture Partners, Intel Capital, August Capital, Sapphire Ventures, WestSummit Capital, Ericsson|
|Hampton Creek Foods||Alternatives for egg-based food products||San Francisco||Series C||$90.0||Horizons Ventures, Khosla Ventures, Marc Benioff, Eduardo Saverin, Mustafa Suleyman, Demis Hassabis|
|Bracket Computing||Develops a cloud virtualization system for enterprise computing||Sunnyvale||Series B||$85.0||Norwest Venture Partners, Allegis Capital, Sutter Hill Ventures, Andreessen Horowitz, Qualcomm Ventures, Artis Ventures, GE 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.|