Recent venture capital news has been rife with talk of valuations, a trend best highlighted by the rising number of unicorns – technology start-ups with a valuation at their last fundraising round of $1bn or more. These unicorn companies are predominantly based in the US, and continue to be associated with Silicon Valley and its venture capital hub. Preqin’s Fund Manager Profiles currently tracks 4,251 fund managers that have venture capital as their primary investment strategy; these firms have raised a total of $426bn over the last 10 years.
New York City, the most populous city in the US and one that has long been associated with private equity, houses the largest number of private equity firms with venture capital as their core strategy. However, New York City’s 246 firms have raised significantly less capital than those based in Menlo Park. Cities in the San Francisco Bay Area have fewer firms than San Francisco alone, but these firms have raised significantly more capital over the last decade. According to Preqin’s data, only 88 venture capital firms are based in Menlo Park, but these have raised more capital than the 443 firms based in New York and San Francisco combined. This demonstrates the significance of the major firms in Silicon Valley, especially Menlo Park, in the venture capital universe. The two venture capital firms to have raised the most capital over the last 10 years are Sequoia Capital, which has raised $10.9bn, and New Enterprise Associates, which has raised $10.7bn; both are headquartered in Menlo Park.
Aside from the US, China has the largest presence in the above table, with Beijing and Shanghai ranked fifth and seventh, respectively, in terms of aggregate capital raised over the last decade. Hong Kong also makes it onto the list in tenth place. There are 166 venture capital firms on Preqin’s database headquartered in these three cities and they have raised $40bn in the last 10 years. London is the only other non-US-based city in the top 10, and although 167 firms are headquartered in the UK capital, these firms have raised less capital than many cities which have fewer firms. This reflects London’s position as an international financial centre, but there remains significant room for growth in the technology and start-up markets. In contrast, the ability of the smaller number of firms in Beijing and Shanghai to raise twice as much capital as those in London demonstrates China’s growing importance in the global venture capital market, which is reinforced by the presence of unicorn firms such as Xiaomi.