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

The nation's technology center saw a broad pullback in venture capital funding in the fourth quarter from the heady pace of spring and summer.

The slowdown in Bay Area financings may have set the scene for more cautious VC investing this year -- particularly given the turmoil in public stock markets, and the high valuations VC investors have awarded many startups.

Companies in the Bay Area, particularly Silicon Valley and San Francisco, took in $4.23 billion in VC financing last quarter, down 40% from the $7.03 billion invested in the region in the third quarter, according to data firm CB Insights. The fourth-quarter funding sum also was 28% below the level in the final quarter of 2014.

A total of 263 Bay Area firms received venture money last quarter, down from 362 in the third quarter and 364 in the fourth quarter of 2014.

Despite the fourth-quarter ebb in VC investment, for the full year VC funds invested $59 billion in startup companies nationwide, according to the latest PwC/NVCA MoneyTree Report based on data from Thomson Reuters. That was the most since the record $105 billion in 2000, during the dot-com frenzy.

In addition, VC firms continued to attract new money for future financing: Investors committed $28.2 billion in fresh capital to VC funds last year, but that’s down 9% from 2014, according to Thomson Reuters and the National Venture Capital Association. "We are seeing significant valuation compression and overall market concern, making fundraising challenging for many technology companies as we kick off the New Year,” said Rod Werner, head of City National's Technology Group. “VCs are having their portfolio companies reduce burn and raise enough capital so they do not have to raise another equity round until late 2017.”

As the heart of U.S. technology development and home base for many VC investors, the Bay Area always takes the lion's share of venture funding. Boston was a distant No. 2 last quarter, at $1.31 billion.

One industry considered ripe for disruption -- finance -- accounted for two VC deals on the Bay Area's top-10 list in the quarter. Green-energy lender Spruce Finance got $180 million in growth-equity funding from investors including Google Ventures in the Bay Area's single-largest financing in the quarter. Spruce lends for projects such as residential solar power.

Also, online consumer finance firm Social Finance took in $150 million in a Series E deal from Chinese social network Renren Inc. SoFi, founded in 2011, says it has issued more than $7 billion in loans to date, including student-loan refinancings and mortgages.

AppDynamics, a software-as-a-service platform that can be implemented quickly to evaluate app performance data in real time, received $158 million in Series F funding from investors including Goldman Sachs and Greylock Partners. The firm is based in San Francisco.

Four-year-old Impossible Foods received a $108 million Series D infusion from investors including Bill Gates. The Redwood City, Calif. company is developing meats and cheeses entirely from plant matter. Its first product -- the "Impossible burger" -- is slated for launch in 2016. A rival California firm, El Segundo-based Beyond Meat, also attracted VC investors last quarter.

In the education sector, Udacity got $105 million in Series D funds from a VC group that included European media giant Bertelsmann. Mountain View, Calif.-based Udacity, launched in 2011, offers online vocational training, largely in computer sciences.

EQUITY FINANCINGS FOR SILICON VALLEY VENTURE-BACKED COMPANIES

  4 Q 2015 3 Q 2015 2 Q 2015 1 Q 2015 4 Q 2014
Number of Financing Deals 263 362 389 331 364
Amount Invested ($MM) $4229.8 $7027.1 $9685.5 $55746.5 $5923.6

TOP 10 DEALS IN SILICON VALLEY

COMPANY NAME DESCRIPTION CITY ROUND TYPE RAISED ($MM) INVESTORS
Spruce Finance Green energy financing solutions San Francisco Growth Equity $180 Google Ventures, Kleiner Perkins Caufield & Byers
AppDynamics SaaS and on-premise application performance management San Francisco Series F $158 Adage Capital Management, Altimeter Capital, Cross Creek Advisors, General Atlantic, Goldman Sachs, Greylock Partners, Industry Ventures, Institutional Venture Partners, Lightspeed Venture Partners
Social Finance Student lending platform San Francisco Series E - II $150 Renren Lianhe Holdings
AppDirect Cloud services provider San Francisco Series E $140 Foundry Group, iNovia Capital, JPMorgan Chase & Co., Mithril Capital Management, StarVest Partners, Stingray Digital
Impossible Foods Plant-based food producer Redwood City Series D $108 Bill Gates, Horizons Ventures, Khosla Ventures, UBS, Viking Global Investors
Udacity Online learning platform Mountain View Series D $105 Andreessen Horowitz, Baillie Gifford & Co., Bertelsmann Digital Media Investments, CRV, Drive Capital, Emerson Collective, Google Ventures
Gritstone Oncology Developer of next-generation personalized cancer therapeutics San Francisco Series A $102 Casdin Capital, Clarus Ventures, Frazier Healthcare, Redmile Group, The Column Group, Transformational Healthcare Opportunity, Versant Ventures
Symphony Communication Services Holdings Workflow platform that aims to improve workplace productivity Palo Alto Series B $100 Google, Lakestar, Merus Capital, Natixis, Société Générale, UBS
AirBnB Marketplace for accommodations San Francisco Series E - II $100 FirstMark Capital
Collective Health Employer self-insurance platform San Mateo Series C $81 Founders Fund, Google Ventures, Maverick Capital, New Enterprise Associates, Redpoint Ventures, RRE Ventures

 

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