Rise Of The Global Startup City – The Geography Of Venture Capital Investment In Cities And Metros Across The Globe by Martin Prosperity Institute
Once the province of American tech hubs like California’s Silicon Valley, venture capital has gone global. This report uses detailed data from Thomson Reuters to chart the world’s leading centers for venture capital investment.
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Its main findings are as follows.
- Venture capital investment across the world totalled $42 billion in 2012, spread across more than 150 cities and metro regions globally.
- The top 10 metros account for more than half (52 percent), the top 20 metros account for almost two-thirds, and the top 50 more than 90 percent of total global venture investment.
- The United States accounts for nearly 70 percent (68.6 percent) of total global venture capital, followed by Asia (14.4 percent) and Europe (13.5 percent).
- The San Francisco Bay Area, which spans Silicon Valley and San Francisco proper, remains the world’s leading center for venture capital investment attracting nearly $11 billion dollars, more than a quarter of all global venture investment. Boston is second with $3.1 billion, followed by New York with $2.1 billion and Los Angeles with $1.5 billion. Outside of the United States, London ranks seventh with $842 million, Beijing ninth with $758 million, Toronto 12th with $628 million, Shanghai 14th with $510 million, Mumbai 15th with $497 million, Paris 16th with $449 million, and Bangalore 17th with $419 million.
- Just two broad regions — the San Francisco Bay Area and the Boston-New York-Washington Corridor — account for more than 40 percent of global venture investment.
- Global venture investment is highly uneven and spiky — it is concentrated in a small number of large cities and metros around the world.
Rise Of The Global Startup City – The Geography Of Venture Capital Investment In Cities And Metros Across The Globe – Introduction
Once the near exclusive province of American tech hubs like California’s Silicon Valley, venture capital has gone global. A number of studies over the past several years attempted to trace the world’s leading centers for startups, high-tech industry clusters, and venture capital investment.1 While these studies provide useful information and context to understand the globalization of startups and venture capital, they tend to be based on data that is not necessarily comparable and systematic.
This report uses detailed data from Thomson Reuters to chart the world’s leading centers for venture capital investment. These data provide granular information on venture capital investment globally as well as the geographic location of venture investments. We aggregated these venture investments by zip or postal code and metropolitan area. This generated data on roughly 2000 venture investments across 170 metros. We then analyzed these data by population and economic output to control for metro size. (See the appendix for more detail on our methodology).
Venture capital investment across the world surged to $42 billion in 2012, spanning over 150 cities or metro regions globally. The top 10 metros account for approximately 52 percent, the top 20 metros account for almost two-thirds, and the top 50 more than 90 percent of total global venture investment. The United States accounts for nearly 70 percent (68.6 percent) of total global venture capital, followed by Asia (14.4 percent) and Europe (13.5 percent).
This report is the third installment of a larger and ongoing Martin Prosperity Institute research project on the changing geography of venture investment and the rise of the startup city.
The rest of the report is organized as follows. The first part charts the leading metros for global venture capital investment overall and then as conditioned by population and economic output. The second part looks at the geography of venture capital investment in North America, Europe, and Asia respectively. The conclusion summarizes our key findings.
Mapping the World’s Leading Venture Capital Centers
We begin by mapping venture capital investment across metro areas around the world (Exhibit 1).
The largest dots are located in North America (United States and Canada), Europe, particularly in the west, and parts of Asia, predominantly China and India. Almost all venture investment occurs in the developed Northern Hemisphere. There is very little investment in the Global South.
Mapping Venture Capital Investment per Capita
Exhibit 2 ranks the top twenty metros in the world in terms of the total dollar amount of venture capital investment, as well as their share of global venture investment.
The United States is the world’s dominant center, home to the top six metros and 12 of the top twenty. Taken together, San Francisco ($6.5 billion, 15.4 percent), San Jose ($4.2 billion, 9.9 percent), Boston ($3.1 billion, 7.5 percent), New York ($2.1 billion, 5.0 percent), Los Angeles ($1.5 billion, 3.4 percent), and San Diego ($1.4 billion, 3.3 percent) account for 44.5 percent of total global venture capital investment. Just two broad regions — the San Francisco Bay Area and the Boston-New York-Washington Corridor — account for more than 40 percent of global venture investment.
But, there are considerable centers of venture capital investment outside the United States. London ($842 million, 2.0 percent) ranks seventh, Toronto ($628 million, 1.5 percent) is 12th, and Paris ($449 million, 1.1 percent) is 16th.
China and India are each represented by a pair of metros. Beijing ($758 million, 1.8 percent) and Shanghai ($510 million, 1.2 percent) are ranked ninth and fourteenth while Mumbai ($497 million, 1.2 percent) and Bangalore ($419 million, 1.0 percent) are 15th and 17th.
Venture capital investment is largely concentrated in a small number of metros across the world with 63.6 percent of investment located in the top 20 metros and 90.1 percent in the top 50.
Larger metros, like New York, London, and Beijing, have an advantage based on their sheer size. To control for this, we also examined venture capital investment on a per capita basis. Exhibit 3 charts venture capital investment per capita in leading global cities. Again, the largest dots are in North America in on the East and West Coasts of the United States. There is a sizeable concentration of dots in Europe and a smattering in Asia.
Exhibit 4 lists the top 20 metros for venture capital investment per capita. Even on a per capita basis, the Bay Area continues to dominate. San Jose ($2,146) and San Francisco ($1, 415) once again top the list with more than double Boston who follows in third place ($665). But now, Durham, in the North Carolina Research Triangle, moves up to fourth place ($475), followed by San Diego ($434) in fifth. Tech hubs like Austin (sixth, $323), Seattle (seventh, $198), and Denver (17th, $90) also make the list, as do superstar cities like Los Angeles (10th, $110), New York (11th, $105), and Toronto (12th, $104). But now smaller metros across the United States move up the list as well: Jacksonville ($120) is ninth, Madison, Wisconsin ($100) is 14th, Greensboro, North Carolina ($97) is 15th, and New Haven, Connecticut ($93) is 16th.
Nineteen of the top twenty metros for venture capital investment per capita are located in the United States. Toronto, Canada in 12th ($104) is the lone exception.
A number of metros that rank highly in terms of total venture capital investment fall much further down based on venture investment on a per capita basis. London, which ranked 7th on overall venture investment, now drops to 39th. Beijing, which ranked ninth in overall venture capital investment, drops to 55th. Mumbai, ranked 15th overall, falls to 70th when accounting for population. Other notable metros that fall out of the top 20 when accounting for population are Paris (ranked 53rd in per capita venture capital investment), Chicago (26th), Bangalore (43rd), and Shanghai (74th).
Mapping Venture Capital Investment as a Share of Economic Output
We now chart venture capital investment as a share of economic output (based on gross domestic output or GDP).
Exhibit 5 charts venture capital investment as a share of a metro’s total economic output or gross domestic product. The largest dots remain in North America, especially on the East and West Coasts of the United States. But now larger dots appear India, as well as Europe.
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