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Silicon Valley Still King of Venture Capital

Silicon Valley Still King of Venture Capital

Silicon Valley in northern California remained the center of the earth for venture capital in the second quarter of 2014 according to PitchBook data. Of the $21.6 billion of venture capital (VC) investment worldwide, $9 billion, or 41.6%, went into 374 deals in what is referred to as the San Francisco Bay Area. Overall, VC funding was at the highest level in 14 years.

For VC entrepreneurship, there is Silicon Valley and then there is everybody else.  The entire continent of Europe came in second place by completing $2.6 billion in VC deals, followed by New York City with $1.4 billion and the Northwest with just $800 million.

The Silicon Valley bell cow deal for the quarter was “Uber,” based in San Francisco, a company that has developed mobile applications that connect passengers with drivers of vehicles for hire and ridesharing services. In dozens of cities around the world, the Uber app allows personal luxury cars to be reserved by sending a text message or using a mobile app. The location of the reserved car can be tracked by customers from their cell phone. 

Founded as UberCab, by May 2011 the company was subject to a cease-and-desist letter from its home town San Francisco Municipal Transportation Agency for operating an unlicensed taxi service, and a legal demand from the California State Public Utilities Commission for operating an unlicensed limousine dispatch. The company has also been sued and restrained by government agencies in cities around the world. But the company changed its name, paid fines and settled some complaints.

The company’s founder, Travis Kalanick, is no stranger to business litigation and government regulatory problems. In 1996 at the age of 21 years old, he had started the peer-to-peer movie sharing website Socur.com and gained 250,000 active users. But he was shut down when 30 media companies sued for $250 billion in copyright infringement. He quickly started another company and sold it for $19 million in 2007. 

Uber closed on $1.2 billion in fourth round VC raise-up on a stunning $17 billion valuation. The money is all the more impressive, given the company has few tangible assets because all of its taxi/limo Lincoln Town Cars, Cadillac Escalades, BMW 7 Series, and Mercedes-Benz S550 sedans are independently owned and Uber just rents miles driven.

Silicon Valley had three other VC-backed companies in the billionaire valuation club that closed funding deals.  Airbnb, the vacation room rental site, was valued at $10.3 billion; Pinterest, the picture book marking site, was valued at $4.9 billion; and LendingClub, the crowd funded small lender, was valued at $3.7 billion. No other region had a billion dollar deal. The next closest was New York City’s Oscar Health Insurance, the Google Map-style doctor-finder and self-diagnosis site, was valued at $720 million.

Although Silicon Valley did attract 42% of VC investment dollars, it only accounted for 23.5% of the 1,591 worldwide deals that were funded with VC money in the second quarter. Although Europe had long been in disfavor by VC investors because of high regulations, high taxes, was a perception of a non-entrepreneurial society; they were second in deals closed at 302.   

Allot of naysayers are claiming that the Silicon Valley tech culture has to start fading, but their continued venture capital dominance means that investors are still bullish on the creativeness and zeal of the Silicon Valley wonder-kids. 

From July 15th to July 29th, Chriss Street will be teaching “Entrepreneurship and Capitalist Business Strategy” at Ho Chi Mihn University in Vietnam

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