Internal rates of return in emerging US tech hubs are starting to overtake Silicon Valley

AngelList analyzed IRR for almost 2,500 deals dating back to 2013

Tech innovation is becoming more widely distributed across the United States.

Among the five startups launched in 2020 that raised the most financing, four were based outside the Bay Area. Prominent VCs like Keith Rabois of Founders Fund, David Blumberg of Blumberg Capital, and Joe Lonsdale of 8VC have moved out of the Bay Area to new emerging tech hubs, which AngelList defines as Austin, Texas; Seattle; Denver; Portland, Oregon; Brooklyn, New York; Nashville, Tennessee; Pittsburgh; and Miami.

The number of syndicated deals on AngelList in emerging markets has increased 144% over the last five years.

The number of startups in these emerging markets is growing fast, according to AngelList data, and increasingly getting a bigger piece of the VC pie.

AngelList compared the performance of startups based in emerging tech hubs to startups in Silicon Valley by internal rate of return (IRR), which measures the rate of growth these investments have generated. AngelList defines “Silicon Valley” as San Francisco, Palo Alto, Mountain View, Oakland, San Mateo, Berkeley, Redwood City, Menlo Park, San Jose, Santa Clara, Sunnyvale, Burlingame and San Carlos.

According to AngelList’s data, startups in emerging tech hubs have an aggregate IRR of 19.4% per year on syndicated deals on AngelList. Syndicated deals on AngelList in Silicon Valley have an aggregate IRR of 17.5% per year.

Total value to paid-in (TVPI), which is the return multiple net of fees, is also slightly higher for AngelList deals in emerging tech hubs (1.67x) than Silicon Valley (1.60x). This means for every $1 invested into startups based in emerging tech hubs, the investor’s portfolio is now valued at $1.67, compared to $1.60 for Silicon Valley startups.

This data is based on a sample of nearly 2,500 syndicated deals on AngelList dating back to 2013, with returns current as of January 1, 2021.

Investors we spoke with offered a variety of reasons for the rise of these emerging tech hubs, including cheaper taxes outside the Bay Area, lower cost of living and a wider distribution of talent brought on by the COVID-19 pandemic.

“Great talent has historically converged in Silicon Valley because it’s been the best place to start a company or grow a career in tech,” said Blake Commagere, a three-time founder and angel investor who relocated from Silicon Valley to Texas in 2020. “Remote work has reduced that competitive advantage, and factors like cost of living are becoming a deciding factor in where to start a company.”

Further, he added, “$10 million in funding goes much further in an emerging tech hub than in Silicon Valley.”

Ryan Bethencourt, founder of the plant-based dog food company Wild Earth, relocated his company from Berkeley, California, to the Raleigh-Durham area of North Carolina last year. He said he was inspired after seeing all the new startups in the area.

“I felt like this was the new frontier for startups focusing on biotech,” said Bethencourt, who also runs the Sustainable Food Ventures Rolling Fund. “As a GP, I’ve already been able to invest in several of my new neighbors.”

Chart showing IRR and TVPI by locale among emerging U.S. hubs, the Bay Area and the Northeast

IRR and TVPI information above is net of fees and as of January 1, 2021. Image Credits: AngelList

Deal counts rising fast in emerging hubs

The number of syndicated deals on AngelList in emerging markets has increased 144% over the last five years. During that same period, the number of syndicated deals on AngelList in Silicon Valley only increased by 77%. The increase in deal volume in emerging hubs has PitchBook predicting that in 2021, Silicon Valley’s share of venture capital deals will fall below 20% for the first time ever.

And more deals have meant more venture capital in emerging tech hubs.

Venture investment in Texas-based startups rose 28% in 2020, to $5 billion. Florida startups raised $2.8 billion in venture capital in 2020 — up from $1.8 billion in 2019.

And while nearly 40% of venture capital money went to Silicon Valley companies in 2020, investors are anticipating a more even distribution of capital in the coming years

“Every day we’re seeing new funds launched focusing outside the Valley, so the foundations are there for more funding to flow into new areas,” said Taylor Davidson, a Pittsburgh-based GP who co-manages the Possibilian Catalyst Rolling Fund on AngelList. “Both founders and investors are applying the playbook learned from the Valley and adapting it to their local situations, and we think that will help companies throughout the USA prove successful in raising capital and building big businesses.”


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AngelList returns data include investments by institutional and professional investors that have superior access to deals and information from AngelList and leads. Returns for these investors may differ materially from returns achievable by other investors on the AngelList platform.

AngelList returns contained in this presentation are as of January 1, 2021. They may include valuation events that occurred (or were learned about) after that date, which is standard practice. All other figures in this presentation are based on data available as of January 1, 2021. We undertake no obligation to provide updates or revisions to reflect any changes in actual or expected returns.

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