Where is Silicon Valley, really?
In 2021, it’s no longer a Bay Area hub backed by Sand Hill Road investors — it’s everywhere. The decentralization of capital to emerging ecosystems has done more than empower local entrepreneurs to raise that follow-on round, it’s also changed our work as journalists.
After Mary Ann published an exclusive look at how fundraising is moving beyond Silicon Valley, we decided to unpack our views on the trend’s long-term impact. Mary Ann followed up her reporting with a few thoughts about how the rise of startup hubs across America is hardly new and certainly nothing to be afraid of. Natasha and Alex dug into data-focused reporting, a key plank of the startup journalism game that is evolving as the market matures. What can we say, the Equity team can’t stop talking!
- Natasha: Funding data doesn’t matter the way it used to.
- Mary Ann: The decentralization of startups isn’t new, even if it is accelerating.
- Alex: The declining impact of aggregated startup funding data is good news.
Natasha: Funding data doesn’t matter the way it used to
I’m going to go out on a limb here and say that, in a world of fast-moving deals and the end of HQs, startup geography data has never mattered less.
Now that you’re paying attention, I’m going to slightly hedge that and say that this somewhat controversial mindset doesn’t include emerging markets. For the longest time, startup data helped us understand how an entrepreneurial scene was growing. The concentration of capital in late-stage deals, for example, would show that the winners are winning but perhaps at the cost of smaller upstarts. A thriving angel scene would let us know that pre-seed startups are going to enjoy a boost of activation energy.
But what happens when the bounds of traditional geography goes away? You can be a startup based in Boston, but where do the concentration of your employees live? Where do your investors live? You may have answers, but maybe they will only be correct for the month.
Digital nomads aside, my point is that distributed work’s popularization clouds a little bit of our classic “local startup” news coverage. Detroit’s scene may be booming, but thanks to a nod from Miami and a wire from Boston. I think this means that our data needs to focus more on networks than ever before, understanding — at an aggregate level — how a startup’s success has a ripple effect across other communities. In other words, Duolingo’s public debut may have benefitted Pittsburgh’s local startup scene, but what if the company’s growth will now only look international? That’s a hypothetical, but I think we’ll need to ask deeper questions of funding data and ground-level wins.
A few weeks ago, I interviewed Vibe Capital’s Ankur Nagpal about his debut fund and strategy as an emerging fund manager. He plans to move, for three to four weeks, to geographies in which he plans to invest: This December he’s spending a month in India, in January he’s spending two months in Latin America and in the spring, he’ll find a new place to live. To him, in-person relationship building continues to be a differentiator that wins deals, even if it is fragmented across many different spots. Data doesn’t measure the impact of this type of fluidity, but questions around co-investing and on-the-ground deal-sourcing will.
Mary Ann: The decentralization of startups isn’t new, even if it is accelerating
Data shows more proof of what we already knew.
As a person who grew up in North Carolina and now lives in Texas, I’ve always been a believer in the quality of talent and potential in cities outside of the coasts (in particular Silicon Valley).
There are many great things about Silicon Valley. But there are also many great things about a lot of other places, so it’s no surprise to me that previously under-the-radar cities such as Atlanta, Pittsburgh and Raleigh-Durham are attracting more and more VC money.
If you look around this country, many metro areas have unique and great things going for them. For some, it’s fabulous schools. For example, all of the aforementioned cities have great universities, which guarantees the pipeline of access to very smart and talented people is plentiful and very likely at a lower cost than if you are located in Silicon Valley.
Speaking of lower cost, I did live in SIlicon Valley for about three years. While it was fabulous in terms of weather and proximity to so many beautiful places, it did feel a bit like it was removed from reality — especially when it came to the startup and venture scene. When I was there, the migration of startups to San Francisco was just really taking off. And now, we’re seeing startups being founded and built all over more than ever AND more dollars than ever funding those startups. Part of that does have to do with the lower cost of living and doing business.
Austin, for example, is one of the fastest-growing cities in the country. While no one would say its housing is inexpensive, the ability to buy much more house for your money than in SF/Silicon Valley is a big draw for many. Not paying state taxes is a big draw for others. “What, you mean I can have a yard, 2,500 square feet and not need a total renovation for under $1 million?” It’s no wonder Austin is bursting at the seams with transplants. The city has long been a hub for software companies and now all sorts of Big Tech companies have set up shop here — from Apple to Google to now Tesla.
No doubt the pandemic has only accelerated the trend toward more companies being funded outside SV. It’s beyond awesome that where a company is “based” is no longer such a big deal. It never should have been and should never be. In other words, Silicon Valley is great. But that doesn’t mean a startup has to be based there to grow, hire amazing people and be a huge success.
Alex: The declining impact of aggregated startup funding data is good news
I went to university in Chicago when the city was at once feeling overlooked by the major American tech hubs and their denizens, and Groupon was blowing up. I attended Uber’s local launch party when the platform only offered black cars. It was a different world: A world in which Silicon Valley mattered most, New York City and Boston mattered some and the rest of the country was a blank space for venture capital activity.
Back then, changes to how one particular city or state was doing were important. And in the following years, things stayed mostly the same. Utah’s rise as a state that startups hired sales talent from was a trend. Then Utah kicked out a bunch of unicorns and became an established hub.
So too, Chicago, with its own crop of successful startups in recent years. And, frankly, Austin and LA and Atlanta and, well, you get the picture.
What this means is that TechCrunch’s dives into startup data have started to sound the same — or at least close enough for them to blur together — as every startup market at is growing at the same time as the number of startup markets has expanded to boot.
So, aggregated startup data by city, state or even nation, has become a retelling of good news of late. It’s all pretty much “up and to the right,” with minor fluctuations. This has led to data mattering less, as the delta between markets simply matters less than it once did. You can build anywhere today, and, therefore, you can mostly raise anywhere as well.
Couple this to the trend that has become extra pronounced in the last year of startups building from day one with distributed teams, and where a startup is “based” has lost a lot of its meaning as well. Perhaps this means that global numbers or data stemming from larger geographic areas matters more than before?
All I can say is that parsing venture capital data on a time-series basis used to be somewhat exciting. Today it’s boring. I could write your Q4 reports now: In a groundbreaking set of results, venture capital activity turned in a strong fourth quarter, capping off a wild year for startups around the world. Record sums were raised in nearly every market. You get the idea.
And if we can guess it from a distance, is it really worth reporting on?