Beijing followed in second position with $23.5 billion of VC investment. New York and Shanghai ranked in third and fourth place attracting $14.9 and $8.9 billion of VC investment respectively, whilst London came in at fifth with $8.3 billion. The flexible office specialist notes that, interestingly, it was Mexico City (ranked 7th) and Gurgaon in India (ranked 11th) that saw the highest yoy growth rates for VC investment.
Workthere’s research confirms that, overall, the global venture capital market has grown four times over the last decade. This is even in spite of volumes falling 9% year-on-year in 2019 to $274 billion following on from a record year for VC investment in 2018.
Cal Lee, global head of Workthere, explains:
“While we saw a reduction in VC investment volumes in 2019 across the globe, Europe and the US remained buoyant reporting increases of 33% and 8%, respectively. We also saw a rise in the average venture capital deal size last year to $8.4 million, which is 81% higher than the average of the past 10 years.
“VC investment, particularly for smaller companies and start-up ventures who often use flexible office space as a starting point for their business, is usually a fundamental part of overall growth affecting both headcount and expansion. However, our research has found that it was the late stage start-ups, rather than early stage that received a greater proportion of funding in 2019, highlighting that investors were looking to place money in more established companies.”
In terms of drivers behind the sector, investment into software is to thank for rapid VC growth over the last decade. VC funding for software companies has grown 8 times over the same time period and now accounts for 35% of all venture capital investment, compared to just 20% in 2010.
Pharma and biotech now make up a smaller piece of the venture capital investment pie, shrinking from 12% in 2010 to 9% in 2019. Investors are turning their attention away from energy, with declines in investment for energy equipment and metals and mining seen over the past decade. In addition, the utilities sector showed minimal growth.
Linking VC investment to the real estate sector, the data collated by Workthere also shows that the average price per month per desk in a flexible office where start-up companies tend to start their lifecycle, varies drastically between the cities listed.
San Francisco is home to the highest desk prices, at $1,050 for a private office desk within a flexible workspace. Boston has the next highest desk prices at $970 and London saw an average price of $815. Singapore, San Diego and the Chinese cities of Shenzen and Hangzhou are at towards the other end of the pricing scale, with average monthly desks prices of $535, $490, $375 and $300, respectively.
Jessica Alderson, global research analyst, adds:
“As the global VC scene continues to attract high investment volumes, the flexible office market continues to capitalise on this trend. In VC hotspots such as San Francisco, Boston and London – cities which have all come in the top 10 cities by VC deal volumes – the average price per desk is also significantly higher than the global average, indicating a correlation between VC investment and flexible office demand. It will be interesting to see how this trend shifts over the next five to 10 years as the flexible office market attracts an increasingly diverse demographic of companies ranging from start-ups to corporates.”