Angel investors & venture capitalists

Sand Hill Road in Menlo Park is the Wall Street of Silicon Valley, home to many well-known venture capital firms. Several of which have a legendary status as they funded some of the most successful hightech companies in the Valley. Companies which all began as innovative startups eagerly looking for money to grow their business, and which are now global industries with a global brand name and reputation. Sequoia Capital, founded in 1972 and one of the most influential VC firms in the Valley, funded Apple, Atari, Cisco, Oracle, Google, Yahoo, YouTube, LinkedIn, PayPal, WhatsApp, Airbnb, Instagram, to mention just a few of the bigger names. Sequoia's funds raised amount to $3.1 billion, the firm did 47 IPOs and 99 acquisitions. Its recent success, WhatsApp, was sold to Facebook in 2014 for $19 billion which made it the then largest acquisition of a venture-backed company in history. TechCrunch calculated that if Sequoia owned 20 percent of WhatsApp it saw a return of about $3 billion (50 times) on its $60 million investment in the company. Kleiner, Perkins, Caufield & Byers, another major VC with $2.8 billion of funds raised, 33 IPOs and 66 acquisitions. It was involved in funding AOL, Citrix, Compaq, Lotus, Intuit, Symantec, Genentech, Zynga, Amazon, and Twitter, to name just a few. Other top Silicon Valley VC funds include Andreessen & Horowitz, Benchmark Ventures, Khosla Ventures, New Enterprise Associates, Accel, and Greylock. The four main US institutional investors in VC funds are public pension funds, private pension funds, university endowments, and foundations. Commercial banks do not play a pivotal role in funding startups. The reason according to former banker John Dean is, that “the prevailing culture of banks, particularly large ones, is risk-aversive; it isn't quite suited to the freewheeling, risk-embracing ethos of Silicon Valley”. Banks, in the words of Stanford economist Thomas Hellmann, go for a financial portfolio that diversifies controllable risks. “By contrast, a venture capital firm will hold a very high-risk but high-return portfolio.” The investment logic of banks and VC's differ markedly.

Venture capital is big in Silicon Valley, both literally and figuratively. It is an integral and indispensable part of our ‘Silicon Valley Innovation & Startup Model’.