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2019 Silicon Valley Index: Investment pouring in to megadeals, yet fewer early-stage deals for startups; commercial space booming; challenges mount

2019 Index coverJoint Venture’s annual study finds region at full employment, more diverse, and still growing, yet at a slower pace

Feb. 13, 2019 – Silicon Valley’s economy has reached new levels of employment, income, innovation,and investments as major companies are fundamentally altering the character and evolution of innovation in the region, reports the 2019 Silicon Valley Index released today by Joint Venture Silicon Valley’s Institute for Regional Studies.

Such larger companies as Google, Apple, and Facebook are behind much of the explosive growth that is lifting the region but straining our capacity to accommodate it all amid rising income disparity, housing costs, and transportation burdens.

“There is plenty to cheer about,” said Russell Hancock, CEO of Joint Venture and President of the Institute. “That all of this growth persists during a time of market volatility and policy uncertainty is a testament to our region’s remarkable agility.

“And yet we worry,” Hancock added. “What’s newly disquieting are indicators that our fundamentals might be changing. More people are leaving the region than coming into it. Most of our growth in tech is being driven by a handful of large, established companies. Our high costs and rising salaries are causing innovative companies to look elsewhere.”

The latest annual Index shows Silicon Valley with an average annual income at $140,000—twice the national figure—new venture investments reaching an all-time high of $50 billion, and staggering numbers of IPOs, megadeals, and patents. Big companies are acquiring smaller ones and leasing commercial space at a dazzling pace.

Silicon Valley’s population has become more diverse than ever, with foreign-born residents now 38 percent of the total. Asians outnumber white residents for the first time and nearly 60 percent of highly-educated tech workers are from other countries. Meanwhile, housing prices remain the highest in the nation and soaring living costs continue to erode wage gains and push the workforce out of the region, increasing commute times and further choking transit.

Highlights from the Index:

Income: Silicon Valley median household income is higher than ever – reaching $118,400 in 2017 – following six years with annual gains outpacing inflation. This is 1.6 times greater than in California and nearly twice the national median. Over a four-year period between 2013 and 2017, the number of high-income households (earning $150,000 or more) in Silicon Valley and San Francisco rose by 35 percent combined, while the number of lower income households declined.

Employment: Silicon Valley added nearly 36,000 workers from June 2017 to June 2018, dropping unemployment to 2.3 percent—so low the region is effectively at full employment. 81 percent of Silicon Valley’s 2017-2018 employment growth was from jobs in Santa Clara County (28,768), and a mere eight percent from San Mateo County (2,792 jobs).

Office space: Google, Apple, Facebook, LinkedIn, and Amazon are leasing some 18 percent of all available office and R&D space. More new Silicon Valley commercial space has been constructed over the past four years (nearly 24 million square feet) than during the previous 13 years combined (18.6 million total between 2002 and 2014).

Investment: Venture capital funding soared to $50 billion in 2018 ($19 billion to Silicon Valley and $31 billion to San Francisco), more than any year including 2000. The funding went into a record 81 “megadeals” over $100 million each. One investment alone (JUUL Labs) was $13 billion. The Bay Area’s 28 IPOs in 2018 more than doubled the 2017 total and generated a combined $5.9 billion—nearly quadruple the amount raised in 2017. Meanwhile, the total number of early and seed-stage deals to startups continued a three-year decline.

Innovation: Silicon Valley generated nearly 20,000 patents in 2017, a slight increase over the previous year. Our share of California patents has increased from 37 to 47 percent over the past 20 years, and per capita patent registrations in San Francisco have shot up 140% since 2011.

Housing: Median home prices have climbed above $1 million. Average monthly housing costs ($2,341) and apartment rental rates ($2,911) are the highest in the U.S. A quarter of renters and 15 percent of mortgage holders spend more than half their gross income on housing. Only 15 percent of new residential units permitted are affordable to residents with low to moderate incomes.

Population: The share of foreign-born residents increased to 38 percent in 2017 (compared to 27 percent in California and 14 percent in the U.S.) and 52 percent of Silicon Valley residents speak a language other than English at home. Only 17 percent of workers in highly technical occupations come from California; 40 percent come from India or China; 29 percent are from other countries. For the first time in Silicon Valley history, Asians represent the largest share of the population at 34 percent.

Civic Engagement: Eligible voter turnout in the November midterm election was 53 percent, the highest in 20 years, and the turnout of young adults (36%) was the highest on record. Of 103 local seats up for election, 54 were won by newcomers (not incumbents). Women won 32 of them, significantly increasing female representation in local elected office

Obesity: 58 percent of Silicon Valley adults and nearly one-third of the region’s students are overweight or obese.

Rachel Massaro, Joint Venture vice president and senior researcher for the Institute, authored the Index with assistance from Stephen Levy, director of the Center for the Continuing Study of the California Economy and a senior advisor to the Institute.

The 108-page study reports the latest data and trends in economic development, workforce, housing, education, public health, land use, environment, governance, arts and culture and other sectors throughout Santa Clara and San Mateo counties and portions of Alameda and Santa Cruz counties and San Francisco.

The Index is published in conjunction with the annual “State of the Valley” conference, a town hall-style gathering of regional leaders, elected officials and citizens in a discussion of Silicon Valley’s economic opportunities, challenges, and future. The 2019 conference takes place Friday, February 15, at the San José McEnery Convention Center.

The complete 2019 Silicon Valley Index is accessible online at www.siliconvalleyindicators.org and may be downloaded from the Joint Venture website.

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About Joint Venture Silicon Valley

Established in 1993, Joint Venture provides analysis and action on issues affecting the Silicon Valley economy and quality of life. The organization brings together established and emerging leaders—from business, government, academia, labor and the broader community—to spotlight issues, launch projects and work toward innovative solutions. For more information, visit www.jointventure.org.

About the Silicon Valley Institute for Regional Studies

The Silicon Valley Institute for Regional Studies provides research and analysis on a host of issues facing Silicon Valley’s economy and society. The Institute is housed within Joint Venture Silicon Valley. For more information, visit www.siliconvalleyindicators.org.

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