Some VCs are saying San Francisco is over. Now they have the numbers to back that up.

Keith Rabois

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Some VCs have been declaring that San Francisco is over, and now they have the numbers to prove it.

Despite record-breaking investment in the venture capital industry, the Bay Area saw a sharp decline in angel and seed deals in 2020, according to a report by Pitchbook and the National Venture Capital Association.

In 2020, San Francisco reached only 81.2% of the angel and seed deals it made in 2019. Although it still had more deals than any other city, it recorded a “a 10-year low in proportion of total deal count.” This means, compared to other major cities, San Francisco was less dominant than it’s been in the last decade.

It’s easy to attribute this to the pandemic; however, the venture capital industry managed to invest over $150 billion this year for the first time ever. VCs weren’t necessarily investing less — this newly-remote world just gave other cities a better chance to get in on the action. 

Read more: Venture capital had a record-breaking 2020: $150 billion in deals, all-time highs for fundraising and results

This could be a told-you-so moment for VCs who have been championing an end to Silicon Valley’s dominance in the startup world. 

Founders Fund general partner Keith Rabois has been vocal about his move to Miami, insisting other VCs are doing the same.  

“There are lots of people that have already moved that haven’t been written about that are pretty high profile,” Rabois told Insider, although he declined to say who. “Post-COVID, I think the concentration of talent has atrophied, perhaps permanently.”

Similarly, prominent VCs like Palantir co-founder Joe Lonsdale left San Francisco and Opendoor co-founder J.D. Ross left the Bay Area for Austin, among a long list of other tech elites who went to other cities. Investors have cited San Francisco’s taxes, tiny apartments, and homelessness issue as reasons for their departure.

Of course, Silicon Valley has been pronounced dead before, and it’s managed to come back swinging. The city has been subject to many tech booms and busts over the decades and the pandemic may have simply ushered in another bust cycle.

“Everyone either thinks San Francisco is the center of the universe or it’s dead,” venture capitalist Ann Miura-Ko told tech journalist Eric Newcomer in his newsletter. “It’s just super annoying because anyone who has been here for over one cycle knows it always comes back and it always also falls out of favor.”

It’s also worth noting the majority of deals were still made in the Bay Area, with a total of 2,503 completed deals. This was miles ahead of second place: the New York area with 1,500 deals. 

Read more: VC Elizabeth Yin says investors are really driven by a ‘hype market’ and if founders use it, they will raise more money at higher valuations

A remote world, however, has certainly given other areas of the country a chance to thrive. Atlanta saw a 13.1% increase in angel and seed deals over 2019, completing nearly 100 angel and seed deals for the first time in over half a decade. Atlanta has been up-and-coming for awhile, landing at number eight on our list of cities outside of Silicon Valley to start your business, and launching startups like MailChimp and Kabbage.

Boston was the only other major city to show an increase in deals. Meanwhile, New York City, Chicago, and Los Angeles all experienced a decrease in deals — albeit not as drastic a drop as San Francisco. 

Still, the report said we may be seeing the start of a long-term trend away from the Bay Area for startups, heralding 2020 as a “harbinger for investment trends to shift further outside of the region’s venture hub.” 

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Why the CEO of $54 billion Twilio is staying in San Francisco amid a recent exodus of Silicon Valley elites (TWLO)

Summary List PlacementWhile several prominent Silicon Valley companies, CEOs, and investors have departed the San Francisco Bay Area for places like Texas and Florida, Twilio CEO Jeff Lawson said he’s committed to staying. 
The CEOs of Splunk, Dropbox, and Brex, as well as Oracle cofounder and executive chairman Larry Ellison, have all recently packed their bags. VCs Keith Rabois of Founders Fund, Ben Ling of Bling Capital, Joe Lonsdale of 8VC, and J.D. Ross of Atomic are also ditching the Bay. 
Participants in the exodus have cited frustrations the Bay Area’s high taxes, high crime rates, and liberal political culture, while touting the warm weather and low costs of living in Austin, Texas or Miami, Florida, which have both become popular locales for fleeing techies. Execs aren’t just moving their own homes, they’re moving their company headquarters: Longtime Silicon Valley companies Oracle, Hewlett-Packard Enterprise, and Dropbox are relocating their headquarters to Texas. 
However, Lawson says he plans to stay put in San Francisco — and won’t move $54 billion Twilio, either. 
His reasoning is straightforward: San Francisco is “our community,” he told Insider. 
“I think now is a time for the technology industry to invest in communities and society at large,” Lawson added. “This is a generational pandemic — and economic impact — that is affecting our society negatively.”
He says he wants Twilio to be part of the community, rather than having an “us versus them” mentality. 
“I don’t think it’s a time to be bailing on our communities and complaining at the same time,” Lawson added. “It’s an opportunity to be good neighbors.”
Lonsdale tweeted that Austin is “far more tolerant of ideological diversity” than San Francisco, while Rabois said, “San Francisco is just so massively improperly run and managed” that “it’s impossible to stay here.” 
Twilio’s business has fared well during the pandemic and customers found its products particularly relevant during the pandemic, Lawson says. Indeed, Twilio’s stock has more than tripled in 2020.
Read more: Twilio salaries revealed: Here’s how much engineers, product managers, and more make at the $51 billion cloud communications company that’s skyrocketed amid the pandemic
That puts it in a position that allows it to help communities that aren’t faring as well, he said. For example, the company has provided product donations, discounts, grant funding, and technical resources to help other organizations respond to the coronavirus pandemic. 
“It’s not just about San Francisco,” Lawson said. “We are a global company. Everywhere we do business, we want our teams to invest in their community.”
Got a tip? Contact this reporter via email at [email protected], Signal at 646.376.6106, Telegram at @rosaliechan, or Twitter DM at @rosaliechan17. (PR pitches by email only, please.) Other types of secure messaging available upon request.SEE ALSO: Why developers at Amazon, Facebook, and Discord love the Rust programming language
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See the pitch deck that landed startup Lacework $525 million in the largest investment round for a cybersecurity company in the last year

Summary List PlacementHow do you convince investors to give a startup $525 million? 
“You have to have a lot of proof points,” Lacework CEO Dan Hubbard told Insider, after his Silicon Valley startup raked in a half-billion-dollar round after previously raising a total of $74.4 million. 
The six-year-old Silicon Valley company addresses the booming area of providing cybersecurity to companies growing and moving their operations to public cloud providers like Amazon Web Services or Microsoft Azure.
Perhaps the most important proof point is the total addressable market (TAM) that Lacework is tackling – a figure that gauges revenue opportunity – is climbing 20% year over year and reaching $13 billion in 2024. Analysts back that up.
Analyst Daniel Ives, managing director of equity research at Wall Street analyst firm Wedbush Securities, told Insider on Friday that “there’s $200 billion up for grabs in the next five years in cloud security.”
“We have the right product in the right market at the right time,” Hubbard told Insider last week. “The problem has come to us.” 
The company says it has seen revenue triple each of the past two years as more businesses build and run applications on the major cloud platforms. The company did not disclose revenue or specific valuation, but says the latter is above $1 billion. 
PitchBook shows the funding round was the largest in the cybersecurity industry for the past year, and the 22nd largest in all US industries over that span. 
It could have been even larger, Hubbard said. “There was an incredible amount of interest. There are going to be some people who feel left out.” 
Mike Speiser, managing director at Sutter Hill Ventures, compared the startup to his firm’s runaway success investment Snowflake, which has rocketed to a market cap of some $76 billion after its September IPO. 
Here’s the pitch deck Lacework used to land the mammoth funding round. Some slides with customer and competitive data have been removed by the company to protect proprietary information.


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