附近上门

San Francisco today is mostly populated with two kinds of people. The first group complains all the time about how much everything costs. The second has too much money to care.

Our recent 附近上门 analysis of unicorn creation and exits in San Francisco鈥檚 tech sector indicates that second group is on the rise. Big IPOs and acquisitions are happening at a steady clip, and new unicorns are rising from the fog-covered hills. That bodes well for purveyors of things like five-figure and .

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But what about startups that haven鈥檛 made it big yet? Does the city of Uber, Airbnb and Dropbox still have room for entrepreneurs on an instant noodle budget?

In this second installment of our series on San Francisco’s startup funding scene, we attempt to answer that question by taking a look at funding trends across stages. Our core finding: San Francisco is still a major hub for new startups, but exits are heating up the most.

Seed Stalls

First, let鈥檚 look at seed. For entrepreneurs who need cash, it makes sense to set up shop somewhere with a lot of money floating around. That, along with a deep local talent pool, may explain why new founders are willing to accept the high costs of living and working in San Francisco.

Even so, there are limits. While San Francisco continues to spawn plenty of seed-funded companies, 附近上门 data indicates that the funding and round counts have slowed from post Dot Com-era peaks hit a couple years ago.

So far this year, 157 San Francisco startups have reported raising a seed or angel round, collectively bringing in around $200 million.¹ At first glance, that looks like a precipitous drop from the past few years, as you can see in the chart below:

However, initial figures may be misleading. The numbers we cite here are based on reported data. Seed and early-stage rounds often take several months or quarters to report, and it鈥檚 not uncommon to see tallies done a few quarters later total 50 percent higher.

So, given the level of forecasting uncertainty, it鈥檚 probably too early to call a major slowdown in San Francisco seed funding. That said, it鈥檚 pretty clear, even from these preliminary numbers, that the city鈥檚 nascent startup scene is no longer in high growth mode.

What鈥檚 happening? Perhaps it鈥檚 all the multi-billion-dollar local companies sucking up the talent supply. Or millennials choosing to spend their time earning a paycheck rather than perfecting an elevator pitch. Whatever the precise cause, anecdotally, San Francisco residents say it appears the city鈥檚 tech circles are populated with more employees and fewer founders than a few years ago.

Still, we鈥檇 hate to give the impression that San Francisco is no longer a vibrant place for new startups. Certain spaces seem to be heating up, such as real estate, where , mostly seed and early-stage, closed rounds this year, on track to well exceed 2017 levels.

Creative business models abound as well. There鈥檚 , a seed-funded company based in San Francisco and Norway that builds machine learning technology for fish farms. , short for English Language Speech Assistant, is a mobile app that uses speech recognition to help with accent reduction.

Meanwhile, on the real estate front, there鈥檚 , a seed-backed roommate matching service that turns two-bedroom luxury apartments in three-bedroom dwellings using a high-tech device known as the partition.

Early Stage Is Holding Steadier

For a startup, getting early-stage funding is sort of like moving up from the partitioned room to the standard bedroom. You haven鈥檛 struck it big, but things do feel a bit more solid.

When it comes to producing companies that make it to this level, it looks like San Francisco is still chugging along. So far this year, at least 110 companies have closed early-stage rounds (Series A or B), bringing in roughly $1.6 billion. If things continue at this pace, the 2018 number will come in ahead of the prior two years.

In the chart below, we look at early-stage round counts and funding totals for San Francisco companies from 2012 to this year:

There are heavily funded companies in the early-stage mix this year, too, including a number of large rounds for enterprise collaboration and fintech. Two of the largest early-stage rounds went to collaboration companies, including , developer of a shared inbox for teams, and , which makes tools for group projects.

On the fintech front, both , an emerging markets-focused app for providing credit, and , a mobile banking provider, raised big Series B rounds. For some examples, we鈥檝e put together a San Francisco early-stage rounds this year.

If seed funding falls, it鈥檚 likely early-stage round counts will show an eventual decline. For now, however, there鈥檚 still a plentiful supply of seed-funded companies launched in the past couple years that are ready for Series A and B. Plus, local venture firms have plenty of cash to put to work.

Late Stage Increasingly About Liquidity

Late stage encompasses companies at very different inflection points. It鈥檚 a category that includes everything from the $20 million software startup Series C to the billion-dollar pre-IPO unicorn financing.

Given that wide variation, it鈥檚 best to put aggregate numbers in context. Our topline figure for this year — that 35 San Francisco companies raised about $2 billion in late-stage funding — requires a bit of parsing.

But first, here鈥檚 a chart showing late-stage round counts and investment totals for San Francisco companies since 2012:

As you can see, it looks like funding totals and deal counts are trending down. But given the current exit environment, that鈥檚 not necessarily a negative indicator. While we鈥檙e seeing fewer big pre-IPO rounds for San Francisco companies this year, we are seeing more actual public offerings, including the massive debut of Dropbox in March and the offering of e-signature unicorn DocuSign this week.

There are some really big rounds in the late-stage mix too, especially for companies that deliver food and groceries. , which delivers for restaurants, and , which provides groceries, raised $535 million and $350 million, respectively, in rounds closed this year.

All About The Ecosystem

Just looking at the numbers, the big picture is this: San Francisco is waist-deep in technology companies at all stages. To date, more than 1,400 companies here have raised $10 million or more in venture funding. And that鈥檚 just within city limits.

Given that concentration of funded companies, it鈥檚 no wonder life in startup-land seems increasingly crowded and costly. It may also be why many new entrepreneurs still feel that although they can鈥檛 afford to live here, they can鈥檛 afford to be anywhere else.

1. About a quarter of the 2018 seed funding total came from a single, non-traditional financing: a $50 million infusion from WhatsApp founder Brian Acton to form the Signal Foundation, a non-profit led by creators of the Signal encrypted messaging tool that will build and maintain privacy apps.

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