Venture Capital

VC industry data shows growth but no bubble

By January 27, 2014 3 Comments

Recently I’ve been hearing a lot that there is a new bubble in Silicon Valley. People are worried that it will burst and we will feel the effects over here. They generally cite one off events like Snapchat turning down a $3bn acquisition or Google’s $3.2bn acquisition of Nest as evidence.

This sort of debate seems to come round every year or two and my view today is that there are localised incidents of frothy behaviour but nothing widespread enough that we should call it a bubble.

The data CBInsights just published on the volume of venture investment bears this out. Transaction values and volumes are rising, but not at bubble rates.

VC investment trend q12011-q42013Comparing this with the chart below from the 1999 bubble and two things stand out. Firstly growth in investment is far slower now than it was then, and secondly at $8bn per quarter total investments now are less than half the Q1 2000 peak.

Screen Shot 2014-01-27 at 13.16.31Also of interest from the CBInsights data is that funding in New York grew a whopping 49% in 2013 to $2.9bn. I haven’t seen 2013 data for the UK yet, but in the middle of Q4 corporate finance boutique Ascendant were projecting we would see c$1.3bn over the year. New York has leapt some way ahead of us.