High Tech Venture Capital Funding 2016 Q3 : What’s Ahead for 2017

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November 29, 2017

By: Jack Nelson, Research Analyst, JLL

There’s an old saying: Everything is relative.

“Everything is relative” might easily sum up the Venture Capital market in 2016. Q3 was a quiet quarter for what has traditionally been a dynamic industry. US venture capital funding fell 13 percent on a trailing basis. The number of VC-backed tech deals also dipped by 35 percent year-over-year.

Bay Area venture capital funding still performs

The Bay Area still accounted for half of all VC funding in the third quarter with $1.73B in San Francisco’s tech VC sector alone.  However, while investors are still putting money towards expansion and late stage companies, there were just seven deals greater than $100M so far this year, compared to 35 in 2015, and no fundings in Uber territory (+$1B).  San Francisco saw a 21 percent drop in technology funding on a year-over-year basis.

q3-2016-san-francisco-high-tech-vc-funding-dashboard

Plug-and-Play Pays

What’s the takeaway for the real estate market? Look for the real estate market to continue to progress akin to previous quarters, with VC backed companies focusing on limiting capital outlay.  This means valuing plug and play space both on a sublease and direct basis.  Both late and early stage companies maintain this strategy, however we will see greater expansion from later stage firms who are capturing an increasing percentage of VC investment dollars.

What’s lies ahead for venture capital in 2017?

The good news is that 2017 should feel better than the 12 months we’ve just been through.  The IPO market has been making a slow comeback, and VC’s are going to start pressuring some of the bigger unicorn-sized companies to make a run at the public market. If these startups can make a solid performance, we could see a slight uptick in funding and that should bode well for owners and investors in the commercial real estate sector.

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About the author:
jack-nelson
Jack Nelson is a Research Analyst, examining macro trends and specific data points to help tell the real estate story in San Francisco.

Contact Jack directly by phone at +1 (415) 395-4946 or via email at jack.nelson@am.jll.com.

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