Venture: San Francisco Bay Area Leads 2nd Quarter VC Funding

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When a prospective entrepreneur looks at the San Francisco Bay Area, he or she sees it as an area that provides a great opportunity for them to establish their business as they’re surrounded by successful companies from various industries. Whether if those industries are tech or healthcare, one crucial thing for Silicon Valley companies to maintain financial stability is having investors that support them with millions (or billions) of dollars in venture capital funding.

According to the San Jose Mercury News, venture capital funding in the United States in the 2nd quarter of 2018 rose to $23 billion, with the San Francisco Bay Area leading the way with the most deals conducted. A total of 271 startups in the city of San Francisco had received a total of $5.6 billion in funding and the South Bay region was ranked the 3rd best region in the U.S. with 166 deals that totaled up to $3.9 billion.

Earlier this year in the 1st quarter, there had already been over 2,000 venture capital deals nationwide that were conducted and those deals led to $30 billion of funding being invested into many companies throughout the United States. The amount of venture capital funding that was invested in the 2nd quarter, albeit slightly lower than the 1st quarter, was still able to make an impression on the venture scene, especially when Lyft had raised $600 billion in Series I funding at a post-money valuation of $15.1 billion and the leader behind that funding was Fidelity Ventures.

The first two quarters of 2018 were prosperous for venture-backed companies in the San Francisco Bay Area as for the first time ever, the region had raised more than $10 million in consecutive quarters. For companies based in Silicon Valley and the rest of the Bay Area, $11.7 billion were invested in them by venture investors between April and May although the funding went to just a total of 501 deals, in comparison to $13.7 billion that got invested by the 523 deals that were conducted in the first three months of 2018.

Major metropolitan areas and cities across the United States are continuing to catch up to the Bay Area’s lead as the premier hub for VC funding, including San Diego, ranked 6th nationwide in terms of funding for the tech sector, which saw its firms raised $706 million as a result of 29 deals being conducted between the firms and their venture backers. In the same 2nd-quarter, Seattle saw 44 deals conducted for a total of $793 million, which included $155 million invested in Rover and $93 million invested in Qumulo.

Before the growth of venture capital funding had been invested in these Silicon Valley companies for the past two quarters, it should be mentioned that last year, the New York Metropolitan Area had pushed Silicon Valley out of the top spot as the region that contains startups that attract the most venture capital funding. In the 3rd quarter of 2017, New York-based startups had garnered $4.227 billion of investments compared to $4.177 billion of investments for companies based in the San Francisco Bay Area.

However, venture capital funding in Silicon Valley companies aren’t limited within the boundaries of the United States as foreign venture capital firms have partaken in their fair share of investing, particularly firms that are from China. Between January and May of 2018, Chinese VC firms, whose main focus has been biotech and communications technology, had invested in $2.4 billion into Silicon Valley startups, even during a time where U.S. President Donald Trump is blocking Chinese access to sensitive technologies created in this country.

The Trump Administration recently proposed measures that aim to bar investments that have at least 25 percent Chinese ownership from buying or investing in companies that produce technologies that are deemed “significant” by the White House. These measures are seen as a challenge to Beijing’s “Made in China 2025” plan, which is aimed to bring China as a leader in innovative industries such as robotics, microchips, self-driving cars.

Another topic worth mentioning about the rise of China's venture capital scene closing in the gap between itself and Silicon Valley is the potential for Chinese startups to become a leader in fundraising over the next few years. Chinese startups accounted for 47% of the world’s venture capital funding in the 2018 2nd quarter, compared to the combined 35 percent of the U.S. and Canada, and that accomplishment had been helped by Alibaba Group Holding affiliate Ant Financial Services’ $14 billion funding round.

Even in the midst of the U.S.-China trade war, the venture capital funding scene in Silicon Valley remains strong as results have shown in the first two quarters of 2018, especially with Sequoia Valley raising $6 billion, the largest raise in Silicon Valley history. As the largest venture capital fund in Silicon Valley, Sequoia Valley’s $6 billion raise in the 2018 2nd quarter (which may increase to an extra $2 million) is viewed as a challenge to its global competitors, particularly one of Japan’s top funding firms, SoftBank.

Sequoia Capital’s creation of its new $6 billion fund was also in response to Softbank’s investments in Silicon Valley, which has also invested in many tech companies globally through its $100 billion “Vision Fund”. Among Softbank’s Silicon Valley investments was the $865 million round to Menlo Park-based construction startup Katerra and a $535 million round to DoorDash, which had contributed to the increase of VC funding for the 1st and 2nd quarters of 2018.

San Francisco Bay Area companies and startups leading the 2018 2nd Quarter VC funding can be seen as a sign of positive things to happen for the venture capital scene in Silicon Valley and may ensure that other companies in the future will attain funding from VC firms too, whether if those firms are local or foreign. Continued investments in startups are necessary for Silicon Valley to enhance and maintain its spot as the top region of venture capitalism in the United States.