tl;dr: Silicon Valley is still #1 for startups, New York is up slightly, and Boston is shrinking relative to other cities. Otherwise, things are pretty stable in America’s top 15 startup hubs.
The health and vibrancy of startup communities is a perennial topic of discussion amongst founders and investors. Last year, Compass published a report declaring that New York City’s startup community has finally reached the vaunted status of “mature,” putting NYC firmly in second place behind Silicon Valley as the best startup hub in the world.
The Top 15
Of course, New York and Silicon Valley may be the top hubs in the US according to the Compass report, but how do they stack up over time? To answer this question, we analyzed over 21,000 Angel, Seed, Series A, Series B, and Series C deals made between 2006 and today. We also included startups based in forty American metropolitan regions. Each hub was then ranked by its relative share of a decade’s worth of total startup funding activity, separating out the top 15 and aggregating the other 25 under the label “other cities.”
In rank order, the top-15 startup regions in America (over the past decade):
- Bay Area
- New York
- Boston
- Los Angeles
- San Diego
- Seattle
- Washington, D.C.
- Chicago
- Austin
- Atlanta
- Salt Lake City
- Miami
- Philadelphia
- Dallas
- Denver
Collectively, these fifteen cities account for roughly 93% of the total VC dollars invested and 90% of the number of deals struck from seed stage funding through Series C.
Performance Through Time
Surprisingly, little has changed in top-performing cities’ relative shares of dollars invested and deals struck. Older ecosystems that were big 10 years ago are still big today, while smaller startup hubs stayed small. With so much attention being paid to maturing ecosystems like Chicago and Seattle—as well as already mature ones like NYC—one would expect to see some rapid growth in these cities relative to their peer cities, but that’s not what we find.
Here is a chart showing the relative dollar volume of early-stage VC deals comparing the top 15 hubs:
And here is a chart showing the relative share of deals struck in these same top 15 cities over the past decade:
At face value, it appears there hasn’t been much change over time. Roughly 70% of the dollar volume and number of deals are invested and made in the top four cities, with relatively minor ebbs and flows over time driven by occasional bursts in funding in certain cities. In Q4 2010, Chicago accounted for 8.36% of the dollar volume (over 4x its historical average) due to big rounds raised by Cleversafe and Elevance Renewable Sciences. But on the whole, things have remained fairly stable.
“Hockey-stick growth doesn’t really happen on the macro level, and that is okay.”
However, the devil is in the details. Boston has experienced a slight decline in early- and growth-stage startup funding activity, shrinking its average share of dollar volume by approximately 20% between 2006 and 2016. Despite the fact that Boston remains the nation’s preeminent location for life sciences and other high tech deal-making, consumer web and other companies are simply being founded and funded elsewhere at higher rates.
New York startups, on the other hand, have more than doubled their relative share of the dollar volume invested into new tech companies nationwide between 2006 and today. Many of the companies founded between 2009 and 2012, when “Silicon Alley” was really coming into its own, found success and stayed put, and now serve as anchors in NYC’s startup community.
So far in Q3 2016, New York City accounts for over 25% of total VC dollar volume. Recently, PhishMe raised $42.5 million, the code learning website Codecademy raised $30 million, and mid-market funding platform Axial raised $14 million, all in Series C rounds.
What does one take away from all of this?
- Startup funding activity is highly concentrated in startups from just a few major hubs, which should come as no surprise.
- The fortunes of cities wax and wane over time as startup activity shifts over time, which leaves room for cities with maturing startup ecosystems to rise above old incumbents.
- Despite all of this room for change, it’s very important to remember that, basically, startup rankings have remained very stable over the past decade.
New York startups’ current flush of fundraising success didn’t come from out of the blue. The city has been a major player in America’s startup ecosystem for the past decade, and it has edged out Boston by inches, not leaps and bounds. Let that be a lesson to the startup communities that didn’t crack the top-10: hockey-stick growth doesn’t really happen on the macro level, and that is okay.