Silicon Valley and San Francisco continue to dominate venture capital numbers; 7th-ranking Seattle has just 2.28% of the action

The numbers are startling. Aaron Renn writes of a new article by Richard Florida. He quotes from it:

“The Bay Area—that is, San Francisco and Silicon Valley—currently accounts for nearly 45 percent of total venture capital investment in the entire United States. And the Acela Corridor, spanning Boston, New York, and Washington, comprises another third. Together, these two geographic regions attract nearly three-quarters of America’s venture capital investment. And, just the five leading metros account for more than 80 percent of total venture capital investment and 85 percent of its growth over the past decade. That’s spatial inequality on steroids.”

Tech-centric Seattle shows up among the top ten, but the dominance of the major sectors means that if you’re out of the top five, you just don’t account for much of the action.

In Florida’s CityLab article, he explains the data.

The data cover venture capital investment in 45 metros over the period 2006 to 2017. (Pitchbook provided us with an even more detailed spreadsheet of the data than was originally organized for and published by the National Venture Capital Association.)

Seattle, he writes, experienced VC stagnation.

Other established tech hubs have failed to keep pace with the growth of leading metros, San Francisco and New York. Seattle, remarkably, saw virtually no growth in its venture capital over the past decade, while both Silicon Valley and Washington, D.C., saw growth of roughly 60 percent, a far cry from the 400-plus percent growth in San Francisco and 500-plus percent growth in New York. And while “rise of the rest” metros like Charlotte, Nashville, Pittsburgh, Portland, Dayton, Huntsville, Tampa, San Antonio, St. Louis, Cincinnati, andSacramento, did see considerable growth in venture capital investment in their startups, together, they accounted for less than three percent of U.S. venture capital investment in 2017. (Emphasis added.)

What’s all this signify?

Not surprisingly, venture capital investment is higher in metros with higher levels of innovation (measured as patents) and higher concentrations of high-tech industry firms. Also not surprising is the fact that venture capital investment is greater in places with a higher-skilled workforce, whether measured as the share of adults with higher education or the share of the workforce in the creative class. Conversely, venture capital investment across metros is negatively associated with the working class share of the workforce. It follows that these are more affluent places: Venture capital is associated with both higher economic output and wages.

Venture capital investment flows to more urbanized places. It is positively associated with size density, and higher rates of public transit commuters.

Perhaps more surprisingly, venture capital investment reflects the contours of America’s political divide. It is strongly associated with more liberal metros and negatively associated with more conservative metros.

Yet, as he writes, Seattle “remarkably” lagged in growth. And there’s this.

… venture capital investment is also connected to the New Urban Crisis. Metros with more venture capital investment have higher housing prices and people spending a greater share of their income on housing. These metros also have higher levels of wage and income inequality.