Startup Craziness Deflates, Hits Silicon Valley & San Francisco

Venture Capital gets prudent – with consequences. Few areas in the US are as dependent economically on the startup ecosystem as Silicon Valley and San Francisco. And the crazy boom that peaked in 2014 and 2015 lifted all boats, but then the tide went out.
It’s a larger US phenomenon, but San Francisco and Silicon Valley feel it particularly. Venture capital investments in the US ‘downshifted again’ in the first quarter, according to the current report by the National Venture Capital Association and PitchBook Data. It was the sixth quarter in a row of declines, and the number of deals dropped to the lowest level since Q3 2010,
The startup funding industry ‘is likely reverting to 2012-2013 levels of investment after peaking during the past few years,’ the report says. It represents a ‘more disciplined approach with a much more critical eye on investment opportunities.’ With first financings declining and with VC-backed companies, such as Uber and Airbnb, staying private longer and thus not allowing their investors to exit, ‘venture investors are focusing more of their efforts on supporting existing portfolio companies,’ rather than funding new ones.

This post was published at Wolf Street on Apr 6, 2017.