Key insights from Silicon Valley Bank's Startup Outlook Report. SoCal startups are fueled by a flourishing ecosystem that includes a growing number of local equity capital sources from both venture capitalists and corporate investors. While their outlook is cautiously optimistic, they continue to hire.

1. Southern California
Startup Outlook 2017
KEY INSIGHTS FROM SILICON VALLEY BANK’S
STARTUP OUTLOOK SURVEY
@SVB_Financial #StartupOutlook

2. U.S. Startup Outlook 2017 - SoCal Report 2
Capitalizing on consumer, software, space and life science innovations,
companies from all over Southern California are thriving. They are fueled
by a flourishing ecosystem that includes a growing number of local equity
capital sources from both venture capitalists and corporate investors.
We expect 2017 will continue the string of great years, with several VCs
closing large funds and multiple high-growth companies filing to go public.
In this second annual Southern California-focused report, you’ll learn how
tech and healthcare executives from San Luis Obispo to San Diego view the
opportunities and challenges in 2017. These findings come out of a larger
annual SVB survey of nearly 950 entrepreneurs, primarily based in the U.S.,
U.K. and China.
Entrepreneurs all over tell us that they are experiencing a greater amount
of uncertainly this year compared to last. Consequently, that uncertainty
has led to a more cautious outlook. However, they’re still hiring, and they’re
still optimistic.
While Southern California may be considered an “emerging” tech hotbed,
the truth is that our region has birthed a tremendous amount of innovative
companies that are now powering the digital age. Of these next-generation
stars — Snap, Ring, ZipRecruiter, Dollar Shave Club, Blackline, Hulu and
SpaceX — the youngest is six years old.
SVB continues to grow its footprint in Southern California. Last year,
our Santa Monica office more than doubled market share of early-stage
companies in Los Angeles. SVB’s Orange County and San Diego markets
also grew substantially. The survey shows some interesting differences
between this dynamic Southern California ecosystem and the broader
survey findings. Here are a few contrasts:
• Southern California startups were more likely to be in the consumer
internet/digital media and healthcare sectors.
• These respondents also tended to have less revenue than the average
U.S. startup, but a higher percentage reported they planned to turn a profit.
• Around fundraising, Southern California startups said they planned to rely
more on corporate venture compared with the U.S. overall.
We will use these findings in two ways: To help inform policymakers about
how to support companies across our region and help startups execute
on new strategies for success. Please view all of the Startup Outlook 2017
reports. We hope these findings from Southern California, the U.S., U.K.
and China offer you insights and benchmarks as you chart your business’
course in 2017.
Rob Freelen
Managing Director
Market Manager, Los Angeles
Silicon Valley Bank
Strength in the SoCal Innovation Sector
LETTERFROM
MARKETMANAGER

3. U.S. Startup Outlook 2017 - SoCal Report 3
SoCal startups
are cautiously
optimistic
More than half of SoCal startups say
they expect business conditions to improve
in 2017, and only 6% think conditions
will worsen.
Describe your outlook on business conditions
for your company this year compared to last:
BUSINESSCONDITIONS
40%
Will stay
the same
6%
Will be
worse
54%
Will be
better

4. U.S. Startup Outlook 2017 - SoCal Report 4
Extremely challenging
37%
23%
FUNDING
More SoCal startups
find fundraising
“extremelychallenging”
Fundraising is difficult for all startups, but
nearly 37% of SoCal startups say it is “extremely
challenging,” compared to 23% for the U.S.
overall. SoCal has far fewer resident VCs than
Silicon Valley, which often requires startups
to bootstrap longer.
What is your view of the current
fundraising environment?
SoCal U.S.

5. U.S. Startup Outlook 2017 - SoCal Report 5
Venture
capital
Corporate Private
equity
Angel/
Micro VC
Individual Other
39%
10%
51%
16%
FUNDING
After VC, SoCal
startups depend on
corporate venture
Overwhelmingly, startups expect their next round
of financing to come from VCs. In SoCal, corporate
investors also play a meaningful role: 19% of
SoCal startups say corporate investors are their
second most likely source of capital compared
to just 11% for U.S. startups overall. The region’s
concentration of digital media startups attracts
more corporate investment, particularly in AR
and VR companies.
Other includes: organic, growth, bank debt, IPO, grant, crowdfunding, merger.
6%
13%
7%
6%8%
13%
11%
19%
What do you expect to be your company’s
next source of funding?
SoCal U.S.

6. U.S. Startup Outlook 2017 - SoCal Report 6
Majority of SoCal
startups expect
to be acquired
Acquisition is the dominant realistic, long-term
exit strategy of all startups. Despite excitement
around IPOs, few startups expect to go public.
That is even truer in SoCal, where just 4% expect
to have an IPO, compared to 16% nationally.
More SoCal startups are focused on consumers
rather than enterprises, which typically leads to
faster profitability. With profitability, companies
can choose to stay private longer.
What is the realistic long-term goal for
your company?
53%
Acquisition
U.S.18%
Stay
private
16%
IPO
13%
Don’t know
58%
Acquisition
4%
IPO
25%
Stay
private
SoCal
13%
Don’t know
FUNDING

7. U.S. Startup Outlook 2017 - SoCal Report 7
SoCal startups expect
M&A to be even
stronger in 2017
Nine of 10 SoCal startups predict as many
or more mergers and acquisitions in 2017.
One of the more interesting M&A trends is
the increased appetite of acquirers outside
the technology sector, creating additional
opportunities for startups.
How do you think the M&A market will
change in 2017?
43%
No change
9%
Fewer
acquisitions
48%
Expect more
acquisitions
FUNDING

8. U.S. Startup Outlook 2017 - SoCal Report 8
SoCal startups
continue to hire
A large majority of SoCal startups plan
to expand their teams in 2017. For 86%
of these startups, finding the right talent
is challenging.
What are your projections for hiring new
employees this year?
26%
Keep at
current
level
1%
Reduce
workforce
73%
Increase
workforce
HIRING&TALENT

9. U.S. Startup Outlook 2017 - SoCal Report 9
PUBLICPOLICY
What are the most important public policy issues
affecting companies like yours?
Access to talent
is top policy concern
of SoCal startups
With finding skilled workers so difficult, SoCal
startups named access to talent as the top public
policy issue affecting companies like theirs.
Healthcare costs are a close second. For more
perspective on these issues, and to learn U.S.
entrepreneurs’ ideas for the new administration,
see Startups to President Trump: Ideas to Grow
the U.S. Innovation Economy.
Note: Respondents were given the opportunity to select multiple responses.
30%
46%48%
30% 29%
Access
to talent
Healthcare
costs
Corporate
taxes
Patent
litigation
Cyber­
security

10. U.S. Startup Outlook 2017 - SoCal Report 10
HIRING&TALENT
More than half
of SoCal startups
have no women in
executive positions
Women in tech leadership has been a topic of
conversation in the U.S. tech community and
globally for several years. It is well known that
women are underrepresented on startup boards
and in the executive suite. While 55% of SoCal
startups have no women in a C-level role, just
16% say they have programs in place to increase
the number of women in leadership roles.
Percentage of SoCal startups with no women
in leadership positions:
No women
in executive
positions
63%
No women
on board of
directors
55%

11. U.S. Startup Outlook 2017 - SoCal Report 11
Policy is driving
some SoCal startup
operations offshore
One in four respondents say that regulations
prompted them to locate facilities or move
non-sales operations outside the U.S., in line
with national findings.
PUBLICPOLICY
34%
Tax policy
31%
Regulatory
environment
34%
Immigration
policy
27%
Here’s why
Have U.S. laws and regulations materially affected your
company’s decision to locate facilities or hire employees
for operational non-sales activities outside the U.S.?
Hired or moved
operations
offshore
Yes

12. U.S. Startup Outlook 2017 - SoCal Report 12
ABOUTTHESURVEY
Industry sector
Profitable
56% Yes
Ownership
69%
Technology
(net)
15%
Healthcare
(net)
16%
Other
Revenue stage
Total
respondents
941
Primary place of business
62%
U.S.
14%
U.K.
16%
China
8%
Other
17%
Pre-revenue
65%
Up to $25 million
in revenue
18%
More than
$25 million
in revenue
95%
Private
5%
Public
Our eighth annual survey of technology and healthcare executives offers insight into what’s on the minds of innovation leaders
today. For this year’s survey, we received 941 responses covering such topics as how innovation companies are faring, hiring
projections and how government policies are affecting business growth. About 10% of the total respondents were located
in Southern California.
About the Startup Outlook 2017 survey
Peerless Insights Survey, a third-party firm, conducted the Startup Outlook 2017 survey online on Silicon Valley Bank’s behalf from November 14, 2016, to January 3, 2017.
44% No

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SVB Southern California Offices
Santa Monica office
1901 Main Street
Santa Monica, CA 90405
Los Angeles office
15260 Ventura Boulevard
Sherman Oaks, CA 91403
San Diego office
4370 La Jolla Village Drive
San Diego, CA 92122
Orange County office
200 Spectrum Center Drive
Irvine, CA 92618
Peerless Insights Survey, a third-party firm, conducted the Startup Outlook 2017 survey online on Silicon Valley Bank’s behalf from November 14, 2016 to January 3, 2017.
This material, including without limitation to the statistical information herein, is provided for informational purposes only and is compiled from the survey that we worked on with Peerless Insights, a third-party source.
The information should not be viewed as tax, investment, legal or other advice nor is it to be relied on in making an investment or other decision.
You should obtain relevant and specific professional advice before making any investment decision. Nothing relating to the material should be construed as a solicitation, offer or recommendation to acquire or dispose
of any investment or to engage in any other transaction.
Silicon Valley Bank is a member of the FDIC and the Federal Reserve System. Silicon Valley Bank is the California bank subsidiary of SVB Financial Group (Nasdaq: SIVB).
©2017 SVB Financial Group. All rights reserved. SVB, SVB FINANCIAL GROUP, SILICON VALLEY BANK, MAKE NEXT HAPPEN NOW and the chevron device are trademarks of SVB Financial Group, used under license. CompID—274
About Silicon Valley Bank
For more than 30 years, Silicon Valley Bank has helped innovative companies and their investors to be successful, providing targeted financial services and expertise. Offering
commercial, international and private banking services in innovation centers around the world — including Southern California offices in Santa Monica, Los Angeles, Irvine
and San Diego — SVB helps address the unique needs of innovators. Visit svb.com.
Learn more at svb.com/startup-outlook-report.
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