VC funding, which was already demonstrating exponential growth prior to the pandemic, has surged during the Coronavirus crisis. VC funding in the United States surpassed $90 billion in 2020. That trajectory has only intensified heading into 2021. VC funding in Q1 reached a whopping $61.7 billion and is on pace to obliterate last year鈥檚 pace in what could only be viewed as the golden age of VC funding.
The VC industry serves a vital role by funding entrepreneurship and innovation. While the popular perception is that VC funding is about initial research and development, most of it goes to support companies as they commercialize their innovations and grow. They provide fixed assets and working capital for all manners of infrastructure; from manufacturing to marketing鈥攁nd critically, to employment and real estate.
For those that have suggested a Roaring 20s economic scenario coming out of the pandemic, this surge in VC funding may represent the framework for this to occur. The current ramp up is about the next wave of technologies that will drive the economy heading deeper into the 2020s and beyond. New and fast-growing technologies like blockchain, the internet of things (IoT), artificial intelligence (AI) magnified by the network effect will likely dwarf past tech surges in adoption, scale and disruption.
Within strong tech markets, VC funding has been a major driver of real estate demand (particularly for office space) over the past three decades. Yet, despite record levels of funding, little of this has yet occurred against the backdrop of the pandemic and uncertainty over the long-term implications of work-from-home (WFH). This paper explores the real, but difficult to quantify, relationship between VC funding and real estate demand and why strong tech office markets may soon be the beneficiaries of a significant wave of pent-up and new demand even as clarity is only beginning to emerge around the impacts of WFH.