The VC Market in Silicon Valley in 2015

Silicon Valley has long been the seat for venture capital funding and technological advancements. Over the last year funding appears to have dropped in some aspects and some VC firms have looked elsewhere for investment opportunities. But Silicon Valley is not out of the game by any means, it’s just changing the way it is played. Venture capitalists have plenty of opportunities for investing in startups in the region and trends indicate it is likely to get better rather than worse.

First Quarter Reports from Silicon Valley

In the first quarter of 2015, Silicon Valley saw a drop pin the number of companies obtaining venture capital funding. This is the third quarter in a row that there has been a decrease. However, the Silicon Valley is still the number one place for venture capitalists like Efraim Landa to look for exciting new startups to invest in. The region had 284 companies to receive VC funding during this year’s first quarter. That’s down by about 10% from the same time last year; and down 16% from the final quarter of last year. However, at the same time the actual dollar amount invested by VC firms was up for the region. Last year it was at $4.95 billion and this year at the same time it is at $5.05 billion.

Biotech Booming in Silicon Valley

Silicon Valley is still king when it comes to software but lately bio-technology has been getting in on its fair share. Most would say that biotech is booming in Silicon Valley since there are some huge venture capitalist investments being made into the industry. There are even quite a few IPOs, more startups that are promising breakthroughs in gene therapy, cures for deadly infections and even more technology being produced to diagnose and treat diseases that used to be considered untreatable altogether.

In the first quarter alone, biotech firms were able to raise $573.9 million in investment funds. That’s a jump of 103% from this time last year. The biotech sector now ranks third in VC fundraising even though software is still the primary industry, biotech is coming of age.

Why is biotech growing so rapidly? To answer that we have to look past Silicon Valley. Other science hubs like Boston have seen a large surge in VC funding. On a national level, biotech investments passed $1.7 billion in the first quarter of this year. That’s more than a 65% increase over that same time period last year. Research is progressing as they embrace a better understanding of how the body works and how diseases work, the FDA has sped up the process for reviewing and approving new drugs, companies demonstrate better results coming from clinical trials and there are more treatments available for fatal conditions. All of these factors make biotech very attractive to the VC market. The surge in bio-technology has investors looking at Silicon Valley and beyond to see just where they want to invest next.

Decline in Private Firms Receiving VC Funding

There has been a decrease in the overall number of Silicon Valley firms getting VC funding. Some of this is likely due to the fact that there were some very large amounts of money raised in 2013 and 2014. For some startups this means they do not need to raise as much money now since they raised so much early on. Another factor may be because of how VC money gets measured. When looking at the investment amounts and stats, most experts only consider the funds contributed from firms whose main business is VC. It’s not taking into consideration other types of funding like mutual funds, hedge funds and contributions other investment firms might make. Because of the surge in tech startups, all of these firms have begun to ramp up investments. One of the biggest problems venture capitalist are facing are the higher valuations. Many are looking at other regions where valuations are lower.

The Biggest VC Venture of Last Quarter

This decline does not indicate that things have gone awry in Silicon Valley in terms of VC funding. The largest funding was given to Pinterest – a social networking site in the amount of $367 million. This deal shows the trends leaning toward younger companies. Coming in second in the region was Social Finance, also known as SoFi who raised $200 million. This company helps individuals refinance student loans. And Nextdoor received $110 million to expand their social networks helping to link people in their neighborhoods.

So VC funding in Silicon Valley is not dissipating or going away, it’s just undergoing some major shifts and changes.