Money is flowing into Silicon Valley and other tech hubs at the highest rate since the dot-com boom — and there does not seem to be a bubble in sight.
In 2017, venture capital firms in the United States dished out $84 billion to 8,000 technology startups and companies, the highest amount of capital seen since the early 2000s, according to an annual industry monitor from the research firm Pitchbook and the National Venture Capital Association.
But unlike before, when many venture capital firms lost their money when the dot-com bubble burst, both organizations noted a healthier environment. One reason is that most of the $84 billion went to large, high-value companies with an established customer base rather than risky, early-stage startups.
The ride-hailing platform Lyft and the shared-office business WeWork were some of the largest U.S. venture capital deals in 2017, receiving $3 billion and $1.5 billion. Unicorns — private companies valued at more than $1 billion, like Lyft and WeWork — received $19.2 billion, or 22.8 percent of all investments.
"While the figures are comparable to the dot-com era, the VC ecosystem appears healthy and driven by different dynamics," said PitchBook CEO John Gabbert. "Later-stage companies with strong consumer traction are commanding large rounds of financing."
However, venture capital firms are not reaping returns as fast as they once did. More venture-backed companies are deciding to stay private, and the number of companies exiting has dropped to 769 — the lowest since 2011.
Exit value stayed relatively flat, thanks to the big returns seen from select IPOs such as Stitch Fix and Roku in 2017.
With companies opting to stay private longer than in the past, venture capital firms need more patience — and deeper wallets — than in the past. The Japanese conglomerate SoftBank and its $100 billion Vision fund and other corporate venture funds have "created a trickle-down effect for the entire industry," Pitchbook said.
