Venture Capital on the Westcoast

The US offers businesses substantial growth and expansion opportunities in the form of investments from venture capital firms.  The venture capital system in the US allows businesses the potential to grow and advance quickly and to realize an improved return on investment.  Both independent VC firms and venture branches of larger entities engage in capital investment for equity stake in up-and-coming companies.

The Western US, and in particular California, is responsible for a large volume of deals and dollars. In the metropolitan areas of San Francisco and Los Angeles, one can find not only numerous start-up companies, but also serial entrepreneurs, angel investors, as well as exit options.

The venture capital industry in the US spurs a culture of innovation that is unparalleled anywhere else in the world.  The high-risk, high-reward culture that surrounds venture capital leads to the proliferation of cutting-edge ideas and technology that affect many industries and consumers daily.  More so than any other industry worldwide, venture capital firms invest in the future.

Important Facts about U.S. Venture Capital

  • The US has a long history of a well-developed venture capital market  that was beginning  to flourish by the end of the Second World War.
  • There are currently around 522 VC organizations active in the US, comprised of both free-standing venture capital firms and investment divisions of corporations that concentrate on venture capital investment within their industry.
  • In 2012, VC investments of around 27 billion USD were made in the US, which accounted for 70% of worldwide VC investments.
  • The value of the total managed VC capital amounted to around 199 billion USD in 2012. California alone accounted for approximately 94 billion USD.
  • Firms in the expansion phase received the most investment capital, while firms in the seed phase received the least.
  • California’s San Francisco Bay Area is an especially attractive environment for start-ups: Silicon Valley alone accounted for around 41% of US-wide VC investment in 2012.
  • Start-ups don’t have it easy, however: on average, of 100 business proposals, only 10 will actually be examined, and only one proposal will ultimately be financed.
  • The lion’s share of 2012 investment capital  went to the software sector,  where cash inflows increased by 10.4% to 8.3 billion USD.   Biotechnology and the industry-energy sector came second and third, respectively (Clean-Tech).
  • According to GTAI, the conditions for exiting out of VC portfolios in the US are favorable, mostly due to to the deep capital market.
  • In 2012, 49 VC-financed firms held their Initial Public Offerings (IPOs). The total value of IPOs in 2012 amounted to around 21.5 billion USD, the majority of which was attributed to Facebook. In addition, the National Venture Capital Association (NVCA) recorded 449 acquisitions in 2012.
  • After California, the states with the most VC investment are Massachusetts, New York, Washington and Texas.
  • The Jumpstart Our Business Start-Ups Act (JOBS Act), which was adopted in 2012, outlines new guidelines regarding crowdfunding, which will emerge as another important form of start-up financing.

Sources: National Venture Capital Association (2012): NVCA Annual Yearbook; GTAI (May 6, 2013): USA sind Zentrum der Wagniskapitalwelt; PricewaterhouseCoopers & National Venture Capital Association (2013): MoneyTree™ Report; Venture Beat (June 30, 2013): A ‘Silver Linings Playbook’ Approach to Venture Capital