This article appeared in the business and technology section of the San Jose Mercury News this morning. According to this article, venture capital investing rose modestly nationwide over the last quarter, but still at 3.7billion total is only half of what it was last year. This means that venture capital funding is on track to end the year at it’s lowest levels since the mid 1990’s, before the boom of technology resulting in the internet as we know it today.
Additonally, the bay area’s share of this pie has declined as well. Venture capitalists invested 1.8 billion in bay area companies this quarter, a downturn of 61% from the second quarter of 2008. According to John S. Taylor, VP of resarch at the National Venture Capital Association, the small numbers are a result of lack of available capital and the rise in reserves by VC’s to support their earlier investments. Furthermore, Mr. Taylor indicated that the stock market crash has drastically altered the portfolios of institutional investors, who are rebalancing by pulling back on additonal funding.
This information does not bode well for the economy of the Silicon Valley as well as the SF/Peninsula as a whole. Startups funded by venture capitalists provide a wealth of jobs in the technology sector, and the innovations they provide have a resonating effect in other areas. For example, Facebook was a venture capitalist funded startup, and it’s success fuels all sorts of venure capitalist funded technology companies that build applications and services for the Facebook service and platform. In turn, in order to support all these services, companies require major infrastructure purchases (servers and software from companies like HP), technology and consulting services (IBM and Accenture) and back office software to support the workforce (Microsoft Office, accounting and budgeting software). . In addition, established companies, as a result of lost sales from this fall out, continue to cut costs in the form of layoffs and flattened spending.
As real estate indicators are trending upward and home sales in Santa Clara county hit a 3-year high (San Jose Mercury, July 17), today’s news continues to drive uncertainty into an already uncertain employment and consumer market. According to Mr. Taylor, “Unless there is a significant increase in IPO’s or acquisitions, or unless captial becomes plentiful, I don’t see this changing much of the paces for the next few quarters”.
As real estate professionals, we need to continue to be persistent with our contacts and improve our knowledge and skillsets. As we live and work in or around the Silicon Valley, we should be sensitive to venture capitalist money and how it relates to our overall economic ecosystem. As these numbers improve, our overall opportunities for business should improve along with it.
Filed under: Realtor Trends, Technology, capitalist, economy, estate, funding, real, venture
Joe Capote 