Start Ups Becoming More Common Outside NY, SF

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A March 26th report from Brookings The Avenue highlights some good economic news for the entire country. According to early-stage venture capital data, we are  seeing an increasing geographic dispersion of early-stage venture capital in the United States.

Author Ian Hathaway emphasizes this is good news. Venture capital seeds high-potential businesses and spurs growth in local economies, so more regions having start ups more getting in on the action means local economic growth in a number of cities all across the country.

Hathaway emphasizes, however, that early-stage VC funding remains relatively ‘concentrated in a small number of metropolitan areas.” That said, his work points out the geographic reach of “first fundings,” or the initial round of investment, has widened notably over the last five or so years.

Comment from analyst on importance of dispersed start ups

Brad Feld, a venture capitalist based in Boulder, and the author of a seminal book on how to build startup communities agrees that this is great news. “I’ve long believed that you can start a scalable company most anywhere, and every metropolitan area over 100,000 people should have a thriving startup community,” Brad explains. “Your work shows that this is gradually becoming a reality.”

Early-stage VC geographical break down

Of note, the top 20 metropolitan areas by total number of deals represented 70% of all first venture fundings in 2014, and the top four cities represented over 40%. The major tech hubs such as San Francisco and San Jose, Calif.; Boston and Cambridge, Mass.; New York; Seattle and Austin were the leaders, but other large cities such as Los Angeles, Washington and Chicago were also boosting their start up activities.

It only makes sense that larger cities, should have more deals on average. So to get a feel for regions that are active in early-stage venture deals but that might not make it into the top 20 because of their smaller size, Hathaway set up a separate filter based on population for the data. This led to cities such as Boulder; Ann Arbor, Mich.; Champaign-Urbana, Ill.; and Charlottesville, Va., showing up in the top 20. Not coincidentally, these cities are home to some of the most famous  public universities in the U.S.. Each city had annual venture capital first fundings on a per-capita basis in more than 2.4 times the U.S. average. Outside of Silicon Valley, Boulder had the most early-stag VC deals per capita in the country.

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