It seems like the Bay Area may be on its way to recapturing the high-tech industry growth that it enjoyed prior to the financial crisis of 2008. The impact of that event was profound, with unemployment in Silicon Valley rising from a low of 4.4% in May 2007 to a peak of 11.6% in July and August 2009. The recovery really didn’t start to get going until the beginning of the latter half of 2011, but when it did it was strong – with the region putting in job growth for 19 consecutive months through January 2013. There were worrying blips in February and July, but August 2013 figures show that jobs were once again on the increase in the Bay Area as a whole – and Silicon Valley showed the strongest performance in 13 years.
Part of the reason that this rebound is so strong may be the dramatic increase in VC funding for startups in the area. VCs are an essential part of the Silicon Valley economy, and include companies such as Gabriel Venture Partners and its Managing Director Rick Bolander. In fact, total new capital investments in the Bay Area more than doubled between April and June 2013, with companies raising approximately $3.2 billion in 316 separate funding rounds. That is part of an overall trend across the United States of increasing capital investment – capital investment in the second quarter nationwide stood at $9.2 billion in 1347 rounds – but the Bay Area continues to dominate. Compared to the $3.2 billion raised in Silicon Valley, Boston-area companies raised about $1 billion, New York startups attracted investment of $800 million, and Los Angeles startups raised a little less than $500 million.
Interestingly, there also seems to be a fundamental shift in where money is going. Software is still going strong, accounting for about 19% of total capital investment, but it was overtaken by biotech in May and June 2013, which now accounts for 30% of total investment dollars. Other areas which saw significant increases include e-commerce, hardware and mobile technologies, with clean technology also making a strong showing. On the other hand, investment in web companies actually declined between April and June, and they now account for significantly less than 10% of total high-tech investment.
The most active VCs in Q2 2013 – in order of number of investment rounds – were TechStars (29), Andreessen Horowitz (21), 500 Startups (19), SV Angel (17), AngelPad (13), and Google Ventures (13). The trend also seems to be continuing into Q3 – for example, TechStars had already funded 27 rounds as of mid-September, and Google Ventures had already surpassed their Q2 totals with an investment count of 17.
It should also be noted that these figures are not the end of the story. While they cover angel rounds and Series A, Series B and Series C funding, they don’t include private equity investments or post-IPO financing. Therefore, the picture is even better than the numbers would indicate.
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