Venture Funding is piling up and being deployed at a record pace; is it a bubble?

It seems like every day there’s another huge funding or acquisition announcement that, while awesome, makes one wonder how this pace can be sustainable. According to Pitchbook, US VC firms are on pace to set a fundraising record this year with over $40B raised so far. Exhibit A: in one week in October, we saw announcements of mega-funding like TigerGlobal ($3.75B), Thrive Capital ($1B), Bessemer’s 10th fund ($1.85B). Later this year, Sequoia is expected to announce an $8B growth fund. Wow.

Thanks in part to mega-deals in the first three quarters of 2018, investors already broke the record for annual deal value and are on pace to deploy over $100B this year. Add to this, anticipated unicorn IPO’s of Uber, Lyft and Palantir along with Qualtrics, Cloudflare, and SoCal’s own CrowdStrike plus IBM’s acquisition of RedHat ($34B) there is an enormous amount of activity in the sector.

Some are calling it a tech bubble and one columnist is already anticipating what happens to startups during the next recession — kudos for thinking ahead!? Clearly we’ve reached a new level of investor confidence in this sector, and there are always overvalued assets out there, but when you look at the companies getting the capital (and the amounts) it’s hard to say that there’s an irrational frenzy like past bubbles.

Given the geographic dispersion of these investments both inside and outside of Silicon Valley, it’s encouraging for all of us growing and nurturing innovation ecosystems. At the Alliance, we have begun tracking investment in SoCal ventures based anywhere from Santa Barbara down to San Diego. Look for more data and analysis on the region as a whole in upcoming editions of the newsletter.

We will also embark on programming in 2019 that will support and nurture the various centers of excellence (we call “nodes”) around the region. This will help us leverage our geographic and technical diversity as a marketable strength that attracts more investment. The excellence is already there, so the rest should be easy, right? Thanks for all your support and we hope to see you at an event in the coming weeks (especially ours, see below)

So do you think there’s a bubble? Let us know what you think in the comments.

@Steve Gilison is Head of Programs and Operations at the Alliance for SoCal Innovation. You can also find him on LinkedIn.