附近上门

Of all the stages of venture funding, Series B is perhaps the most telling indicator of startup investor confidence. That鈥檚 the point at which most new companies have either folded or proven potential for major scaling. For backers, it鈥檚 still plenty risky, but no longer a long shot.

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Previously, we鈥檝e compared the Series B stage to a final on-ramp to the highway. Companies are expected at that point to have proven technology, early indications of market demand, and, for tech startups, at least some revenue (for biotech, clear progress toward clinical trials). The next stop is Series C, where the scaling accelerates.

In an attempt to see how Series B deals are panning out in this pandemic-impacted investment era, 附近上门 took a look at 2020 U.S. funding at this stage. We compared investment totals to previous years, spotlighted standout rounds, and took a look at how sector and geographic preferences are shifting.

The general picture shows a pretty healthy startup ecosystem, with robust funding across a broad swathe of industries. Delving a little more deeply, we can see some shifts underway, including perhaps some early indications that California may be losing its dominance as the epicenter for scaling startups. We unpack some of the numbers below.

Funding is holding steady at high levels

The big picture: Series B funding is holding up. Overall, investors put $15.3 billion into U.S. Series B deals so far this year, according to 附近上门 data. That鈥檚 roughly on par with the same period last year.

If the current fundraising pace continues, 2020 Series B* totals will likely turn out roughly the same as 2019, which was a particularly strong year. For perspective, we鈥檝e charted total U.S. Series B investment for the past five years:

As usual, really big rounds boosted the total. Although the median U.S. Series B round is around $20 million, there have been lots of funding rounds far larger than that.

Supergiant rounds of $100 million or more were particularly prevalent. Out of more than 450 total Series B deals this year, there were 37 for supergiant rounds, per 附近上门 data. We lay out the five largest in the chart below.

Biotech, fintech and more

Among the , biotech was by far the best represented sector, with about half of the supergiant fundings going to companies with ties to the space. It鈥檚 not unusual to see the industry lead for larger rounds, given that costly clinical trials make biotech one of the most expensive sectors for scaling a startup.

Overall, biotech, life sciences and health accounted for more than 43 percent of Series B funding. Telehealth in particular has been a popular area for investment. Although that鈥檚 true across stages, we did see a number of good-sized rounds at Series B specifically, including virtual and in-person care provider , telemedicine platform , and , which offers digital therapy for musculoskeletal pain.

Other areas that saw a high amount of Series B activity include fintech, security and e-commerce. Companies across a wide swath of industries are identified as having an artificial intelligence focus, indicating that AI continues to be in favor with investors.聽

California sees shrinking share of Series B

One standout trend in our Series B analysis is a shrinking share of funding going to Golden State companies.

Particularly significant is that only one of the 10 companies that secured the largest Series B rounds this year is based in Northern California. And that one鈥攁utonomous vehicle technology developer 鈥攈as significant operations in China along with headquarters in Fremont, California.

Certainly, there’s been no giant exodus yet. Companies in California secured 43 percent of all Series B dollars so far in 2020, with the vast majority of that going to the San Francisco Bay Area.

But if you compare to past years, the relative share is down. In fact, it鈥檚 the first time in more than five years that the state took in less than half of all Series B money.

What鈥檚 going on here? We鈥檙e speculating, but it could have something to do with the high cost of scaling a company in the San Francisco Bay Area. Pricey and scarce housing, high living costs, high taxes and an expectation for bigger salaries are all factors that make it far more expensive to build a unicorn-scale company in the global technology capital than most other places. Going forward, it鈥檚 sadly also plausible that climate change worries could prompt more movement away from West Coast cities, particularly with the current wildfire season鈥攖he worst on record.

When looking at where some recipients of the largest Series B rounds are located, it鈥檚 possible that lower scaling costs were a factor. Two companies on the top 10 are from Dallas and another two are from Atlanta. Those are both places known for lower living and operating costs relative to other major U.S. metros.聽

That said, New York and Boston were also home to several of the top funding recipients. While no one considers those cities cheap places to build a business, Boston is a leading biotech hub and New York is big for fintech, so they benefit from more Series B investment in these areas.

Another purely speculative possibility is that the absence of face-to-face networking this year favored companies seeking funding from VCs outside their local areas. The logic here is that in normal times, one might expect a Silicon Valley VC to take more meetings with nearby founders and fewer with faraway ones. But when all meetings are online, geography becomes less of a factor.

At any rate, a shift away from California at the Series B stage suggests that the next generation of U.S. unicorns and decacorns may be less concentrated in San Francisco and Silicon Valley. For now, it鈥檚 still early innings and we鈥檒l see if the trend persists when in-person networking resumes.

* Year-to-date totals for 2020 are as of approximately Sept. 10.

Illustration: .