Global Venture Capital Distribution

Richard Florida published some stats on the distribution of global venture capital investment last week. His work focused on 2012 numbers so the data is a bit dated, but I am sure it is still directionally correct.

This map summarizes his findings:

global VC investment

The bay area numbers are stunning. SF proper and the broader bay area make up 25% of the global venture capital investment activity (~$10bn out of $42bn).

SF, Boston, NYC, and LA are the top four (or five if you count SF and the bay area as two different locations).

London and Beijing crack the top ten. Ten of the top twenty cities are outside of the US. Berlin, a city that USV invests a lot in, was not in the top twenty in 2012 but I bet it is now.

The most interesting thing about Richard’s data are his conclusions about “dense urban cities.” He writes:

The upshot is this: While some smaller places, mainly in the U.S., do well on a per capita basis, venture capital increasingly flows to large global cities, with all their density and dynamism. The leading centers remain the Bay Area and the Boston-New York-Washington Corridor, while a number of global cities outside of the U.S. have become significant centers for venture capital-backed high-tech startups: London, Paris, and Moscow in Europe; Toronto in Canada; Beijing and Shanghai in China; and Mumbai and Bangalore in India. Across the world, the top 10 metros account for more than half of global venture investment, the top 20 metros account for almost two-thirds, and the top 50 account for more than 90 percent. Ultimately, global venture investment ishighly uneven and spiky, concentrated in a small number of leading cities and metros around the world.

Although venture capital investment has certainly “gone global” by spreading to places like China and India, the dominant centers remain large U.S. cities that combine density, great universities, and the open-mindedness and tolerance required to attract talent from across the world. While cities like Mumbai, Bangalore, Beijing, and Shanghai have certainly shown their ability to attract venture investment and create start-up ecosystems, their levels of venture capital remain well below that of the Bay Area, New York, and Boston. As of yet, these former cities are hamstrung by their inability to attract the world’s top talent. Outside of the U.S., the places that seem to have the brightest future as start-up hubs are dense, diverse, global cities like London, Toronto, and Paris, which can effectively compete for talent on an international scale.

This uneven or spiky nature of investment and its flow to great cities marks a broader transition away from sprawling suburban campuses, or “nerdistans.” In recent years, innovation and entrepreneurship have returned to the great global cities and dense, diverse urban areas that have long served as fonts of creativity and invention. What once seemed like a shift toward suburban innovation and startup clusters in the late 20th century has proven to be a brief aberration from the long-held connection between density and innovation.

I would add one more thing to Richard’s analysis. Transportation convenience matters a lot. You can fly direct multiple times a day to and from all of the cities on Richard’s top ten list. Investors value their time and focus it on markets that they can get in and out of easily. I think that has a big impact on where money flows.

But regardless of the reason, I agree with Richard’s conclusion. VC has gone urban. And I think that trend will continue as far as I can see.

#VC & Technology

Comments (Archived):

  1. LE

    Shows the power and the need, even in the internet age, to face to face meetings and serendipity in doing business (of this type).

    1. Matt Kruza

      Or the “good ole boys” connected network power .. or really cynical rentier capitalism at its finest. Love entrepreneurship, but VC’s, including Fred have disproportionate and rentier power. Fred would probably agree, and through comment dialogues with his partner Albert I feel certain Albert would agree. I think both are great guys from what I know of them on the internet. Point being face to face is largely important because certain “faces” retain immeasurable power due to human / political / social dynamics and not real productivity. This map will look different in 2040. How much sooner Idk

      1. LE

        Good ole boy gets you a meeting and will get someone to listen to you (quite important) but not get you a deal. So yes it’s easier to “get a date”. But in the end quite frankly with the amount of deals a VC actually does vs. the amount of meetings they take the idea and who is behind it means a great deal more. Unless of course you are a legacy who has already been funded or comes with particularly good credentials.However consider this. Maybe the way the system is is actually doing you a favor because it forces you to go down a path which is actually less risky and speculative. You know when I graduated college non of this startup crack even existed.

        1. sigmaalgebra

          Best I can tell, except for maybe a few outliers, for information technology startups, the criteria are quite simple and close to what the private equity people might do, what accountants can count, and what commercial banks do.So, there are two main parts:(1) Idea. The part of the idea that matters is, obviously a huge market in the sense that the expected number of customers times the expected revenue per customer less opex, capex, selling costs, etc. amount to a market capitalization of $1+ billion.Opportunities for M&A are secondary.(2) Status.The current status of the startup is crucial, and here the main interest is traction into the identified market significantly high and growing rapidly where traction can be users, eyeballs, revenue, or earnings. Here the evaluations are much like accountants would do, possibly replacing dollars with numerical measures of traction.Really, mostly, the current owners, say, one or a few founders, already have a lifestyle business or are close to it but would like a big check to permit more rapid growth. Then the goal, with the check, is very rapid growth.Points (1) and (2) may be ones strongly enforced by the MBAs at the more important limited partners.This method of business project evaluation is usually in strong conflict with most projects for a new product or service funded by larger governments or companies.E.g., Microsoft spent a bundle on each of Office, NT, Windows Server, X-Box, and Surface before anything like traction was clear.Some government projects have a terrific record from back of the envelop to changing the world, e.g., the Manhattan Project, essentially everything Admiral Rickover did, nearly all the work of Lockheed’s Kelly Johnson, and more.But some government projects with vast plans but half-vast planning, especially projects in services, have been historic flops — it’s too upsetting to list some of the obvious, recent examples.Lesson: There are challenges in project planning.For IT projects, the world is changing: Now, computer hardware, infrastructure software, technical information (e.g., on-line), communications data rates, the Internet, and the cloud yield so much in computing power for so little money that even a solo founder has a good shot, e.g., the founder of Plenty of Fish, at going all the way from first thought to exit alone, owning 100%.Then, the role of venture capital may be shrinking.And, since the Internet reaches nearly all the planet, the role of the major centers of venture capital also stands to be shrinking.Ah, “change” and “disruption”!

  2. LE

    You can fly direct multiple times a day to and from all of the cities on Richard’s top ten list.Would seem then that any VC with a private jet would be able to avail themselves of more opportunities (and less competition) in nooks and crannies w/o scheduled airline service.

    1. fredwilson

      I would not know about that

      1. LE

        Having heard that a certain VC at Sequoia had tried Netjets, I just send him an email [1] and asked him how it was going. He replied quickly and said he now owns his own jet. [2][1] I don’t know him at all but he was happy to answer my question.[2] He is known as being particularly frugal.

        1. JamesHRH

          you kill me LE.Love this post.

    2. jason wright

      i was listening to Bill Gates on Desert Island Discs yesterday. he cited his private jet as one of the most valuable aids to his business and philanthropic activities.

  3. LIAD

    Gells with Steven Johnson’s central theory in Where good ideas come from.Beautiful how transport links still fundamental. I remember my ah ha moment back in high school geography when the teacher told us how ALL major cities had a river flowing by them. Took us a moment to realise the river wasn’t coincidental.I’m also pretty certain the top cities for VC also have more than their fair share of lapdancing bars. Correlation or causation?

    1. panterosa,

      What struck me besides accessibility is the air quality of the top places. India and China are not places you want to live, unless you live there already. As @disqus_Awy3Cl8ObF:disqus will most likely agree, a fair number of startup folks are also into wellness/fitness as optimizing types. If you can’t bike to work, recycle, and so on, the appeal drops.

  4. Matt Zagaja

    One of the big points of contention when I worked in New Haven was the Tweed Airport. The locals do not want it expanded for various reasons but the business community really wants it to expand for the reasons you cited.

    1. creative group

      Matt:We have a family member who graduated from Yale and one who works for Yale U and we agree that Tweed Airport is horrible. Had to wait for a TSA screener to arrive to work to screen us. No fun.Really feel the community is contend in having Bradley in Hartford service the State or expect you travel to our home State NYC.

  5. William Mougayar

    It is surprising that Richard used 2012 data for a 2016 report. He should have used some Mattermark data.Nonetheless, here’s another fact. Canada is the #1 destination for US Tech VC investors outside of the US. Proximity, language, culture & legal similarities, and startups quality are big factors.

    1. Allen Lau

      I agree. It is surprising that 2012 data was used ….On an unrelated note, not sure if Waterloo is included in Toronto’s number. Since San Francisco and San Jose are counted as 2 different locations, my guess is that Waterloo is counted separately as the distance between Toronto and Waterloo is about the same as SF and San Jose. IMO, the Toronto-Waterloo tech corridor should be counted as one.

      1. William Mougayar

        I agree, of course.

      2. JamesHRH

        If there is an area that is a serious threat to the SF-Valley penisula as the #1 source of VC capital in NA, it is the TO-Waterloo corridor: a great urban centre connected to a great academic institution, set in a bucolic environment.All that is missing is a great name for the High Speed rail link – one that can double as the short hand reference for the area.

    2. awaldstein

      What does # one tech investor destination mean?

      1. William Mougayar

        It means in terms of Dollars invested. In other words, US investors invest more in Canada than in other countries outside the US. I don’t have the exact numbers, but they are there.

        1. awaldstein

          Thanks–actually fascinated and surprised.Not what I would have thought.

          1. William Mougayar

            What other country could have be #1? I think Israel was #2.

          2. awaldstein

            Find this interesting as its not something I think about.Now that you’ve clarified it, makes good sense.

          3. jason wright

            do you know how European destinations stack up?

          4. William Mougayar

            Not sure. but my guess would be London as #1 for sure.

    3. Matt Zagaja

      Weirdly Cambridge seems to be the #1 destination for Canadian outerwear this season. Had no idea what Canada Goose was and thought all the Harvard kids had gone on a trip together and got coats, but turned out Canada has just managed to convince Americans to buy $700 jackets and I suppose if they can do that, they can probably sell anything ;). Maybe convince us to adopt universal healthcare next.

      1. B12N

        If you ever wear a Canada Goose jacket, you’ll see why it’s worth $700 :P. (lived in Montreal)

        1. William Mougayar


      2. William Mougayar

        Yup. Canada Goose is the way to go, if you want quality and a bit of showing-off 🙂

        1. jason wright

          is/ was owned by Bain Capital.Patagonia is owned by its founder, who point blank refuses to sell out. i like ethos completely different companies.

        2. Salt Shaker

          Literally 1 out of 3 in Manhattan are wearing Canada Goose outerwear. Wasn’t familiar w/ company but researched to see if publicly traded. Sadly, not. They’re killing it.

          1. awaldstein

            yes they certainly are.

          2. William Mougayar

            yup. i saw a few last week on the streets of NY!

  6. awaldstein

    The world has certainly gone urban. Makes sense that money follows development that follows the market.

    1. LE

      Sure, people are going back to the city.However there are still (and always will be) an entire world of people that don’t live in cities, have no desire to live in cities (they like lawns, low crime and the convenience of cars and shopping centers) and will remain commuters from, or be employed in the, suburbs.My younger brother and sister in law lived in Manhattan until they got married a few years ago. Then the were forced to move out to a town in NJ (close to NYC) and pay an exorbitant price (even there) to live in a good school district for when they have kids. Both being somewhat in entertainment apparently it’s important for them to be close driving distance or live in NYC.No doubt they would like to live in Manhattan if they could but they have no children and want to dine out and party with their friends. Once they have 2 or 3 children and they are dealing with kids and school I don’t feel they will value the same things. (Not to mention the cost).

      1. awaldstein

        of course but my point is that people live where the markets are and that’s where the money should go.

  7. Osman Ahmed Osman

    The 2015 numbers would look drastically different for China (close to $40B total). This really shifts the center of gravity, but also creates a vulnerability – since that number is likely to drop this year, with repercussions.

  8. Guy Hargreaves

    Hmmm, I’m not sure I agree this study is that helpful Fred. The US data might still be good but Asia doesn’t feel right. Sweeping summaries like “bright future in Paris” seem a little lazy especially as more global cities like Singapore or Hong Kong get their act together and offer far superior tax regimes. A lot has happened since 2012.

    1. JamesHRH

      Richard suffers from a thesis trap – everything he says supports his theory that great urban centres are the key to prosperity. I have yet to hear him say ‘ ____ metropolis is doing it all wrong, it will be a creativity ghost town / economic backwater. ‘So, that trap leads to sweeping generalizations that are off base and a lack of attention to detail. He has a bias for big statements that support his big thesis (which, FWIW, is totally correct in my view).

  9. pointsnfigures

    100% agree. I think that density means so much at seed stage. You can experiment, fail, and work directly with customers or users on a personal level. You learn so much more from that experience early than you do late. Yes, it’s possible to create a great singular business in a place like Des Moines (where one USV company is), but it’s much more difficult to create a cluster. I want to be clear, I am not picking on Des Moines; insert any small to medium size city. The inertia is much easier to get going in your direction in major US cities where the ingredients for a great startup community lie. It’s a matter of energizing the bones, sort of like rehabbing a neighborhood.For example in the Midwest, I strongly believe it behooves smaller cities to work with Chicago. Chicago doesn’t become truly great without Champaign; but Champaign can’t do it alone. The same goes for Madison, Indy, St. Louis, etc. History, inertia and other things are strongly on your side if you play the game that way. Lone wolf it and you might be successful, but your chances are longer and the struggle more uphill.If I were in Buffalo, I’d make sure I had very open and active connections to NYC and Boston.

  10. Stuart Kime

    There’s another reason why this trend will continue…smartphone density. In the age of ubiquitous wireless internet and mobile first innovation, the technologies that optimize dense user environments first win.

  11. Sebastien Latapie

    Density / convenience is the main reason why I did not want to stay in Montreal and moved down to Boston – the opportunity for serendipity is just so much higher!

  12. Amar

    The difference between sorted lists based on “absolute $” versus “$ per capita” is very interesting. Durham, NC as #5 was a interesting data point. Thanks for posting this 🙂 I am here (almost) everyday — and have learned a lot through the process.

  13. Gregg Freishtat

    Not show my Southern bias ….. but, Atlanta is the singular best transportation hub in the world, home to an amazing GA Tech, and thriving tech community. (With no material top shelf venture player presence). Been waiting 20 years to see the top shelf VC community to set up shop here.

  14. Takeshi Ebihara

    Thanks for thoughtful insight as always Fred. But about Asia, data is too old and so different nowadays, especially China and India growing phenomenally.Here is last year stats with sources though Japan and SE Asia have not yet announced data.

  15. kirklove

    Two things striking about this chart:1) I’d look to invest in locations that are not served here. Ripe. (non-herd Buffett approach)2) Good gravy the self segregation. A lot of white, mostly English-speaking older men giving money to white, mostly English-speaking younger men.

    1. Donna Brewington White

      1) Do any investors think like this, I wonder?2) Hmmm…Smells like an opportunity brewing somewhere in here. But granted I’m a bit out of my league.

      1. panterosa,

        Opportunity brewing, Miss Brewington!

        1. Donna Brewington White

          Hi “Panterosa” 🙂

  16. Sean Hull

    Transportation yep. Perhaps because nothing beats meeting real people in real life. In spite of all our online identities & social media, face to face is still the killer app.

  17. Donna Brewington White

    I wonder if competing for talent on an international scale could be resolved — at least to some extent — by a more open-minded and creative approach to where that talent comes from and how to attract it. “It” at some point being translated to “them.”I don’t mean to be simplistic. I understand that there are complexities involved. But how much of the complexity is created by a lack of imagination?

    1. Joe Cardillo

      Really like this point. To some extent remote work is breaking down that lack of imagination, especially when it comes to programmers. Ultimately “yeah we are just doing what we’ve always done and it works fine” is a problem not just for co’s but also for investors, accelerators, econ dev, etc.

      1. Donna Brewington White

        Thanks, Joe.These are the types of issues addressed in the book *The Rare Find* (Geoff Anders) — a premise of the book was that companies needed to let go of preconceived notions in order to find the best talent and in some instances the preconceived notion is that the person needs to be housed in an office. Yes, sometimes this is necessary, but not as often as employers seem to think.Interestingly, some of my clients with the most traditional ideas about hiring are startup CEOs, but in all fairness, they are often pushing the envelope in so many other ways or just mired deep in slogging it out that they feel the need to resort to the tried and true when it comes to hiring. I get this. But hiring will not become easier in tech. Something’s gotta give.

        1. Joe Cardillo

          Sorry about the delay, just getting to this. That last point is an interesting one, sort of like how grace is tested not at our best but at our worst…when it comes to hiring we are tested when it is most difficult and, especially for startup folks, when we are at our most sleepless.

          1. Donna Brewington White

            Great words, Joe. I keep reminding myself of this with clients who don’t mean to be difficult but are just trying to live to fight another day. Much grace applied.

          2. Joe Cardillo

            Indeed – I was reading the Mayo Clinic’s Handbook to Happiness a while back (surprisingly easy, short, and good read) and one of the things the author described was a moment he had with a difficult patient where he realized the person was in some sort of deep pain. After that he practiced taking a moment to ask (often verbatim) “why is this person suffering, and what do they need to heal?” .. I’ve used both of those regularly since reading that (interestingly / lately in both my work as an entrepreneur and as someone who lives on the same block as a homeless rescue mission with plenty of foot traffic). We’re all truly only a moment of decency and humanity away from each other.

  18. jason wright

    in the great scheme of things it really isn’t that much in terms of total capital deployed.

  19. wynn lare

    Related post in Twitter ICYMI 16 startup cities ….Posted by airport code for convenience

  20. Rob Gonzalez

    Other things that matter in US vs. European or Asian: (1) initial addressable market (somewhat easier to reach critical scale in US then move abroad than if starting in e.g. UK) and (2) legal protection/precedent including how failed startups are treated in bankruptcy/culturally (I suspect this is a big reason Beijing isn’t bigger).

  21. vruz

    If venture capital can’t see opportunity in Africa and South America, venture capital needs new glasses.Or really, eye transplants.

    1. Donna Brewington White

      Maybe VC needs to be disrupted?

      1. vruz

        Yes, indeed.I think I recall Fred has reflected here on incremental changes that have been happening in the last few years, and how VC as we know it has its days numbered.I pretty much agree with him on that.I think a genuinely global kind of VC (that may not be easily recognisable as VC) is just about to dawn in the next few years.

  22. Benjamin Lejfer

    What about Israel? Maybe this has to do with the numbers coming from 2012, but it’s reported that Israeli tech companies raised over $4 billion(!) last year. That would easily have put it in the top 5 of this list. Not even a mention in Richard Florida OR AVC’s post. Not to mention, India, China, US are all active in the Israeli tech market and its a source of innovation for all their economies. C’mon!

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  24. ShanaC

    Maybe there is something to being urban as the world becomes urban

  25. Emil Sotirov

    Ha! That I would not have guessed – Vienna, Stockholm, Helsinki, Dublin, Oslo – bigger economies than Beijing, Shanghai, San Francisco, Moscow.

  26. LE

    Which I commute 210 miles a day to4 to 4.5 hours per day in a car?

  27. LE

    Well if you are working, your words “another crap job” why didn’t you get the job closer and why are you driving to LA everyday?4 hours is a ton of lost productivity. If you cut that down by even 3 hours (1 hour commute) you could spend that 3 hours prospecting for a better opportunity or even running a side business whereby you could make money to start your own business.