Is Silicon Valley’s hold on venture capital trending downward?
Over the last year, investors, founders, and corporations have been talking a lot about leaving Silicon Valley for hills, prairies, or beaches elsewhere, and the data confirm this trend.
CNBC, citing Pitchbook’s 2021 US Venture Capital Outlook report, reported:
“The Bay Area’s share of total VC count in the U.S. will fall below 20 percent for the first time in history, while other cities around the country grab larger amounts of equity capital for their home-grown innovators.”
This downward trend is not new. As you can see from the chart above, Silicon Valley’s share of venture capital has been declining for a while. When we looked at the origins of emerging fund managers who’ve attended RAISE for the last three years, we also saw a similar trend:
In 2019, 57 percent of funds at the RAISE Global Summit were headquartered in the Bay Area. One year later, that number had dropped to just 44 percent.
While the shift at RAISE may have something to do with the 2020 event being virtual — and thus easier for people to attend from anywhere — we are definitely seeing some new hot spots emerge within the RAISE GP community outside the Bay Area.
Austin, Atlanta, Los Angeles, Boston, Seattle, Chicago, and Miami are few new oft-cited locations.
Earlier this year in TechCrunch, Mark Kvamme and Chris Olsen (ex-Sequoia Capital) spoke about the founding of Drive Capital, based in Columbus, Ohio. While building a fund required establishing a capital-entrepreneur ecosystem that didn’t really exist, there may be “more opportunity than we can invest in,” Chris Olsen said.
“There’s an enormous amount of money that’s spent on research here,” Chris said. “In Silicon Valley, the venture dollars ratio to research dollars is massively too many VC dollars for too little research; the opposite is true here in Ohio. This is more what Silicon Valley looked like in the late 1990s … maybe emerging markets are the most compelling place for venture capitalists to invest. But maybe the most compelling emerging market is America, just outside of Silicon Valley.”
Will 2021 see more funds continue to shift away from Silicon Valley? It might be too early to tell, but we'll keep you posted. Request an invitation to RAISE Global Summit 2021.
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Disclaimer
The Tipping Point Series (“Tipping Point”) is a collection of interviews with fund managers who (a) have previously raised a venture capital fund and (b) are providing advice and insights into the formation and management of venture capital funds (the “Presentations”). Tipping Point is not an offer to sell or a solicitation of an offer to buy any security issued by any venture capital fund, including without limitation, any venture capital fund managed by Tipping Point’s speakers, presenters, or producers.
The Presentations do not (a) provide investment advice with respect to any security or (b) make any claim as to the past, current, or future performance of any security or venture capital fund, and Tipping Point expressly disclaims the use of the Presentations for such purposes. The Presentations are not intended to constitute legal, tax, accounting, or other advice or an investment recommendation. Prospective fund managers should consult their own advisors about such matters with regard to their venture capital funds. Raising a venture capital fund involves significant risk of loss of income and capital, including loss of the full amount raised and invested, which may occur as a result of identified or unidentified risks.
Tipping Point is produced by Raise Conferences, LLC (“Raise”). Raise is a private invite-only venture capital conference, which provides a forum for venture capital funds to network with and present to potential venture capital investors. Although Raise produces Tipping Point, the Presentations are independent of Raise’s conference and do not provide any forum for the Tipping Point speakers, presenters, or producers to solicit the sale of any securities.
