Silicon Valley gets the majority of venture dollars, but NYC is gaining. Click on chart for larger image.

There’s really only one Silicon Valley, and it’s unlikely that any region will supplant this epicenter of technology, innovation and capital anytime soon.

newyork-fundingshareYet, some big cities are trying to make inroads, attempting to chip away at the big-time lead held by the Valley when it comes to venture capital outflow. A new report out from CB Insights paints an interesting picture, analyzing venture capital and deals in Colorado, Southern California, Massachusetts, New York, Texas and Washington.

The conclusion?

Other than New York, the major venture hubs have “shown little progress in dethroning Silicon Valley as the place for tech VC.” Massachusetts and Texas actually are losing momentum, while Washington state appears stuck in neutral.

I’ve talked about this problem in the past, noting my concerns about the availability of capital in the Northwest — especially in light of our home-grown venture community either closing up shop or moving away. (OVP Venture Partners, Frazier Technology Ventures, Polaris Venture Partners, etc.)

washington-fundingshareI’ve also noted the rise of New York in recent years, led in part by an aggressive campaign by Mayor Michael Bloomberg to establish “the city that never sleeps” as a serious tech hub. New York’s share of venture capital dollars is on the rise, now averaging about 14 percent of all dollars. Washington state’s share by comparison is averaging four percent.

As we think about this issue, I am less concerned about competing with Silicon Valley, an entity unto itself. Instead, I’d say there’s more to be said about a secondary tech hub emerging on the East Coast that draws hungry tech entrepreneurs in search of capital.

That place appears to be New York, though I’ve also noted in the past that I am hard-pressed to name a big-time technology company (meaning over $100 billion market value) that calls the city home.

Nonetheless, here’s what the CB Insights report had to say about NYC:

New York’s share of tech deals has grown steadily over the past three years and has stayed near 20% for each of the past three quarters. This has been spurred by a few things. Many of NY’s largest venture-backed exits have taken place since 2010 so it’s a region with some momentum. At the same time, a strong core of investors has emerged to back New York-based cos.

valley-financing1I also asked CB Insights co-founder Anand Sanwal for extra insight, and here’s what he had to say:

“It’s less about other markets not going up and that Silicon Valley is a bit of a juggernaut in regards to tech VC,” he said.  “Interestingly, (New York) is the only market going up and seems to have gotten the flywheel really turning.”

The flywheel is turning in Seattle too, just not as fast as some like me would hope.

As I’ve noted in the past, a technology hub is made up by more than venture capital outflows. (Seattle is blessed with tech titans like Microsoft, Amazon and Expedia, as well as branch operations of nearly every major Silicon Valley powerhouse). But, if you are of the belief, as I am, that venture capital is the rocket fuel to propel new business ventures, I’d still contend that we need to find a way to get a little more in the tank.

Don’t you think so?

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  • nickfinck

    I am a bit of a data fiend so I love it when I see posts on GeekWire like this. Its interesting to see the playing field as a whole. I wonder tho, the cost of living (COL) is quite higher in NY than it is in, say, Seattle. ;) This means 1M in Seattle will go much further than 1M in NYC. What would this graph read like if the COL was factored in? Maybe a follow up post is in order if there is anything interesting that comes out of that refactoring.

    • LaSean Smith

      The data may not be easily available, but the ideal way to normalize across cities would be to roll up the average return-on-equity per deal per region. Then the conversation could shift from quantity to quality of each dollar invested.

      • nickfinck

        Do you mean VC deals? How would you be able to get that data? I think qualitative based assessment would be way better than quantitative for sure. I just have no idea how GeekWire could get those numbers.

  • clibou

    Nice if a few Sandhill VCs follow branch operations of major Silicon Valley powerhouses here, at least hold office hours here. Dave McClure seems to be the only visiting pirate. Seattle entrepreneurs seem to be adapting by securing well regarded local angel funding, then heading down to Sandhill with that as a recommendation.

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