As Venture Capital Retreats Nationally, Boston Remains a Bright Spot

Venture capital funding is holding steady in the Boston market amid broader concerns of a bursting tech bubble. As reported in the Felder Report last week; overvalued startups, reduced funding, a non-existent IPO market and increasing layoffs are becoming more commonplace — particularly in startup hubs like Silicon Valley, Seattle, Denver and Austin. Though trends in venture funding should be monitored closely in the coming quarters, it’s not time to hit the panic button in Boston yet.

After 2015’s banner year, over $1 billion in venture funding flowed into the Boston market during the first quarter of 2016. While this does represent a 20% decline from last year’s blockbuster first quarter, it is well above the fourth-quarter low of $724 million. The thriving life science industry continues to account for a large share of funding in Greater Boston with more than 60% of total volume in the first quarter. Comparatively, funding for life science companies in Silicon Valley was less than 25% of the total. The outlook for growth in life sciences and healthcare is bullish, which could minimize risk and bolster the market’s already healthy demand for lab space in Boston.

Total Funding Chart

The metro area also saw an increase in Series A funding compared to year-ago levels. This bodes well for demand growth from local startups as their commercial real estate needs tend to expand following early funding events.

Funding by Series Chart

As the U.S. enters into the later stages of this expansion cycle frothiness in tech economies is a growing concern. Boston is not devoid of risk, but conditions in the local startup market are favorable as venture capital investors continue to favor the biotech sector.

To see more cutting-edge analysis from the NAI Hunneman Research Department, check out the 2016 Q1 Market Reports.

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