November 15, 2006
The "real" news in VC spending...
(c) copyright View from Silicon Valley, 2006. All rights
reserved.
Nationwide 1H06 VC spending was $12.97M. This figure was breathlessly reported as
up +13% y-o-y and ascribed various other dramatically-wonderful attributes compared prior levels. As usual,
the spin here in Silicon Valley never stops.
As we often recommend, let's look at the actual facts:
1H98
$8.38M
1H99 16.57
1H00 52.15
1H01
20.63
1H02 12.30
1H03 8.97
1H04 11.64
1H05 11.48
1H06
12.97
You can even spin 1H06 as +45% from 2003, which feels like a solid, even strong, three-year
growth rate. Alternatively, 1H06 is only up +5.4% since 2002, which is a truly awful four-year growth rate.
Even
first-time readers can imagine the next set of data we're going to show...
Silicon Valley VC spending since 1998
as a share of the US total:
*USA *S.V.
share
1998 $17.9M $5.6M 31%
1999 49.5 18.4
37%
2000 94.8 33.7 36%
2001 36.4 11.8
32%
2002 22.1 7.6 34%
2003 19.5
6.9 35%
2004 22.2 8.2 37%
2005 22.4
8.3 37%
2006 25.9 8.6 33% (annualized)
*=
(all figures $M)
It's true Silicon Valley is still the king of the VC spending hill and 1H06 was the highest in five
years. However, the Silicon Valley-based 2006 run-rate is still less than 26% of the $33.7M spent by VCs in Silicon
Valley in 2000.
Searching for another way to spin the numbers, let's look at Silicon Valley VC spending vs. jobs.
Aren't the additional jobs needed to run all these hot start-ups the real reason for tracking these figures in the
first place?
Let's see:
VC$ Jobs*
1998
5.6 912.1
1999 18.4 924.5
2000 33.7
941.5
2001 11.8 867.9
2002 7.6 803.5
2003
6.9 770.5
2004 8.2 771.9
2005 8.3
781.6
2006 8.6** 784.6
*= Santa Clara County employment, September each year
**=
annualized
Can anybody find a correlation here? If so, please send us a memo as we seem to have missed
it.
In the end, ~$25M in VC spending is still, "better than a sharp stick in the eye," as my grandmother used to say.
However:
1)
the 2006 run-rate is 25.5% of the 2000 peak,
2) 1H06 represent only a 1.4% CAGR since 1H02
3) Silicon valley VC spending has no effect on
Santa Clara County jobs
4) jobs are still down since 2002
(-2.4%)
-and-
5) not to mention jobs are down since
1998 (-14%!).
Conclusion:
Enjoy the headlines but recognize VC spending is still merely
a shadow of its former self.
VC spending is having NO effect on jobs (unless the VC's happens to be investing
in your start-up).
