Q3 tech funding outlook: Silicon Valley

Valley quarterly funding still lagging below $1 billion

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Dec 19, 2016, 5:59 PM
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VC funding continues to wane in Silicon Valley, with quarterly high-tech investment volume sitting below $1 billion for the third quarter in a row. Investment deal activity is down 30.5% year-over-year, and the number of rounds greater than $100 million is down 80.0% when compared to 2015.


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The current funding crunch is not necessarily reflective of waning investor sentiment, but it does reflect their concern over startup burn rates.

As with so many other tech markets, larger rounds were focused on later-stage companies with strong potential for revenue generation. Seed companies are in a challenging funding market. Term sheets are getting signed, but investors aren’t experiencing the same FOMO* as years past.


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With more caution over seed and early-stage hopefuls, demand for space will be driven by well-funded startups who have enough cash reserves to maintain growth and survive a potential market tapering.

Rents in prime Valley submarkets are still well above the market average, so cost-conscious startups will benefit from sublease space left behind by expanding tech companies. Some heavily funded startups have recently banked large blocks of newer Class A space for future growth and are subleasing portions in the interim, but this trend is likely to cool.

VC funding is expected to maintain cruising altitude for the rest of 2016, but where the market turns in 2017 is still uncertain.


For more insight, see how third quarter venture capital funding fared nationwide.


*Fear of missing out


Research: Christan Basconcillo | Editor: Lillian Veley