Each year new tech hubs around the world attract more and more media attention, but are they also attracting more VC dollars? And are these rivals putting a dent in the dominance of the grandaddy of tech hot spots, Silicon Valley?
According to new data from private equity and venture capital database PitchBook, the answer is encouraging for up-and-coming hubs around the world — but not exactly worrying for the Valley.
The numbers show the Bay Area saw a 10.6% decline in deal flow from 1,370 financings in 2012 to 1,225 in 2013. This is a continuation of a multi-year trend, according to PitchBook. “As Silicon Valley’s valuations skyrocket, VC investors may be seeking to invest their money in companies outside the region, where they can get more value for their cash,” the company’s blog explains. “The Bay Area has seen its share of global venture capital deal flow shrink every year since it hit a 10-year peak in 2006. The region comprised 27% of deal flow and 30% of capital invested that year. In 2013, it was 20% and 27%, respectively.”
So which regions are benefitting from the broader geographical interest of venture capitalists? Primarily Europe, PitchBook reports: “The continent saw its share of global VC deal flow grow from 19% in 2009 to 23% last year, as the number of investments stayed at a relatively steady 1,466… Capital invested rose sharply from $7 billion in 2012 to $9 billion last year.” Germany in particular is a focus of VC interest.
… But Dollars Up
But before you start wringing your hands and worrying about the declining percentage of deals done in the Bay Area, it’s also important to note that while the area has taken a smaller share of the VC pie, the pie itself has grown larger, meaning that more dollars are still flowing into the area then ever before.
“Investors funneled more money into those fewer deals as capital invested increased to $13.4 billion last year from $12.5 billion in 2012,” reports PitchBook, which pinpoints the cause of the slump in the number of deals to “to a 12.7% drop in the number of rounds for software companies.” Interest in media and healthcare devices companies is also down.