Is the West Coast the Best Coast for VC investments? Since 2010, VCs have invested 53% of total capital into Pacific Coast companies
PitchBook releases its first U.S. Venture Ecosystem Report
SEATTLE — August 5, 2016 (9 a.m. PDT) — PitchBook Data, Inc. has identified five metropolitan statistical areas (MSA) on the Pacific Coast that, when compared to their East Coast and Midwest counterparts, have received the bulk of total U.S. venture capital investments since the start of 2010. Los Angeles, San Diego, San Francisco, San Jose and Seattle have accounted for more than half of total capital invested into U.S. startups since 2010 ($346.5 B)--a massive $183.8 B invested across more than 20K completed deals. The top East Coast VC ecosystems, comprised of New York, Boston, Washington D.C., Philadelphia and Atlanta, received a fraction of that, just 23% ($82.5 B) of total U.S. capital invested, during the same time period. This, combined with the number of VC funds raised, the percentage of unicorns headquartered on each coast and the total exit value of VC-backed companies, might indicate that the West Coast offers the most fertile tech ecosystems for both nascent startups and Fortune 500 giants.
“I was living in the Bay Area when I decided to start PitchBook,” says John Gabbert, CEO & Founder of PitchBook. “When considering where to headquarter my first company, I knew I wanted to stay on the West Coast. I was looking for a place with the same startup mentality found in Silicon Valley, but with less competition and more stability--that’s how we landed in Seattle. There’s a huge pool of diverse talent here, the cost of living isn’t through the roof (yet) and we have a widespread ethos of innovation that lends itself to starting and growing viable companies.”
Since 2010, VCs have poured $101.4 B into San Francisco-based startups--a whopping 29% of total capital invested into the U.S. during the same time period. This can largely be attributed to the unicorn uprising: of the 97 current unicorns in the U.S., 46% hail from the San Francisco MSA. Unicorns like Uber, Pinterest, and Airbnb, have absorbed more than $30 B of venture capital invested in the region since 2010.
At the same time, investors have had no trouble raising capital and companies are still finding successful exit ramps:
· Since 2006, VCs have raised $117.6 B across 529 VC funds.
· The total value of VC-backed exits for San Francisco MSA companies amounts to $90.8 B (since 2010). So far in 2016, there have been 87 VC-backed exits, valued at $13.6 B, already a 20% increase from all of last year in terms of capital exited.
San Jose-Sunnyvale-Santa Clara
San Jose ranks as the second largest VC ecosystem in the U.S., according to PitchBook’s U.S VC Ecosystem Report. The sheer amount of capital invested into the region since 2010, including investments into companies like Palantir Technologies, Cloudera and Pivotal Software, and the massive amount of capital exited during the same time period by companies like WhatsApp and LinkedIn are the key drivers behind this ranking.
· VCs have invested $43.27 B into San Jose MSA-based companies since the start of 2010--nearly 13% of total capital invested into the U.S. during the same timeframe.
· The total exit value of companies based in the San Jose MSA since 2010 amounted to $63.5 B, second only to companies based in the San Francisco MSA.
Los Angeles-Long Beach-Santa Ana
VC activity in Los Angeles peaked last year, both in terms of capital invested and the number of deals completed, contributing to its ranking as the fourth largest VC ecosystem in the U.S. The following factors point to LA being an up-and-coming hub for venture capital:
· Since 2010, the number of completed venture capital deals in Los Angeles has risen steadily, climbing from 318 deals in 2010 to 687 last year. The total amount invested during that time amounts to $17.6 B.
· Last year alone, VCs invested a record $4.7 B across 687 deals
· 2015 also saw a record amount of capital invested into first financings--$862 M--up 230% from 2010 figures.
Ranked the 6th largest VC ecosystem, Seattle is home to some of the largest and most powerful tech companies in the world. Since 2010, $8.5 B was invested in Seattle-based companies across 1,717 completed deals.
Though Seattle maintains a comparatively healthy venture landscape, the tide may be starting to turn:
· 2015 saw a decade-high $2.1B invested across 352 deals, should activity continue at this pace, 2016 will experience a 46% dip in capital invested and a 31% drop in deal count.
· Meanwhile, first venture financings are on pace to hit just 47% of last year’s volume, signaling that innovation in the VC ecosystem may be stalling.
· Exit activity is also stagnating. 2015 saw a 28% dip in terms of the number of exits and a 71% drop in terms of total exit value.
At the same time, top investors like Alliance of Angels, Madrona Venture Group and Keiretsu Forum - who together completed a total of 49 deals last year - are continuing to raise healthy amounts of capital. Investors in Seattle MSA have raised a total of $7.6 B since 2006.
San Diego-Carlsbad-San Marcos
Though receiving the lowest ranking compared to other West Coast MSAs, San Diego’s venture community has picked up in recent years and actually outperformed Seattle in terms of total VC invested and exit value since 2010.
San Diego saw $9.4 B invested across 1,317 total deals since 2010. Perhaps more interesting, as a sign that this MSA might be entering into a phase of growth, last year saw the highest number of first financings on record: 115 companies closed their first round of financing in 2015, up from 108 in 2014 and just 90 in 2013.
Exit value in San Diego MSA amounted to $8.7 B since 2010, buoyed by notable exits like NantKwest and Seragon Pharmaceuticals. Meanwhile, of the 97 unicorns in the US, two are based in San Diego: Sapphire Energy and Human Longevity.
Download the full report here [LINK]. For a daily dose of the latest news in the venture capital space, subscribe to the PitchBook newsletter //pitchbook.com/PEVC_News.html.
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Stephanie Cook & Abbie Havern
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