Despite an overall slowdown in Q4, emerging regions like Los Angeles, Seattle, San Diego, and Orange County bucked the trend with increased investment across the board. Combined, they raised over $3.8 billion in funds during the final quarter and Seattle (18%), San Diego (29%), and Orange County (24%) saw double-digit growth. The leading sectors responsible for this increase were consistent with national results, including information technology, business and financial services, and health care.
Public unicorns may dominate in the near future
As the days of unlimited private growth are ending, it’s very likely that private companies won’t be raising as much capital as they have in the recent past, opting instead to go public earlier. I predict that the public unicorn population will continue to grow and even outpace the creation of private ones. But, this transition will take time as we have an entire class of companies that grew up in an environment of seemingly unlimited capital availability. Companies will also continue to raise money as a defense mechanism and utilize the significant amount of capital they have raised over the years.
Looking ahead at 2020 and beyond
As we kick off the new year and decade, I expect to see a slowdown in growth in the venture capital industry. The strong momentum we’ve seen in the past two years will likely continue into 2020, but it will eventually become difficult to keep outperforming strong years. I predict we will see less than $100 billion raised in venture capital in 2020 – and this is a good thing.
In addition, the uncertainty around the ongoing trade war, which has had an impact on frontier technology, could possibly continue. I believe companies with consumer exposure should insure they have ample capital to take financing risk off the table as we continue to learn to deal with economic uncertainty and volatility.
Long-term, I am very bullish on the overall asset class and the opportunities technology has to impact countries, companies and individuals. It’s a question of timing. In my experience, it always takes more time and money than expected. After all, I’ve never met an entrepreneur who said they achieved their goal faster than they anticipated and it cost less than they thought it would.