For many years, Silicon Valley was the favorite destination in the United States for venture capitalists. In recent years, however, a shift has started that is seeing increasing numbers of VC investments moving away from this part of the country, not only to other parts of the U.S. but also to other parts of the world.
A report titled Beyond Silicon Valley recently published by PitchBook and VC company Revolution clearly shows that over the last couple of years the San Francisco Bay Area has been attracting an ever-shrinking share of venture capital investments in the United States. This percentage first dropped below 30% around 10 years ago and by December 2021 startups in the Bay Area could only attract a 27% share of the VC pie.
Why Are Venture Capitalists No Longer Queuing To Invest in Silicon Valley?
A major reason why not so many startups are choosing Silicon Valley as their favorite VC location seems to be that many of the business founders simply no longer find it such a desirable place to live. Startup-related work in industries such as cybersecurity, healthcare, and SaaS can nowadays increasingly be done remotely. And the extremely competitive housing market in this part of the U.S. is making it increasingly unattractive for employees of these companies to relocate there.
VC company Initialized polled Bay Area VC business founders in 2020 and did a follow-up survey in February last year to find out where the majority of these businesses would base their startups if they had a second chance. The findings of the survey were quite interesting. Before Covid, a large majority (41.6%) of participants would have chosen Silicon Valley as their favorite destination. New York was in a remote second place with 13.5%, followed by Los Angeles (also 13.5%) and Seattle (10.1%).
By February last year, however, the number one choice was no longer even a physical location. No less than 42.1% of participants said the option at the top of their list would be for their VC firm to operate remotely. Only 28.4% would choose the San Francisco Bay area. At 6.8% New York had to share the number three spot with Austin. Seattle is for all practical purposes out of the running.
A Significant Share of Venture Capital Money Is No Longer Going to the US
In 2008, the United States accounted for no less than 68.25% of all global VC investments. This percentage dropped to around 50% by the end of 2020. And if one looks at other trends, it becomes clear that a shift is underway. When it comes to median deal size, for example, Asia has now become the number one destination, with the U.S. in second place and Europe in a distant third place.
A similar trend becomes clear if one looks at the global number of VC deals. Here Asia, with a 36% share of the total number of deals, has also emerged as the winner. Investment platforms based in Asia are experiencing huge growth and in 2020 venture capital investments outside the Americas reached an impressive $136.2 billion.
Asia Seeing the Biggest Growth in VC Investments
According to data gathered by Crunchbase, there are currently no less than 4 299 venture capital investment firms in the Asian region. Asia also set a fresh record with VC capital investments increasing by a whopping 50% from 2021 ($110.2 billion) to $165.1 billion in 2022. This also exceeded the previous record of $150.2 billion notched up in 2018.
So while the US currently still manages to attract the biggest share of global VC investments, this is unlikely to remain the case over the long run.
Final Words on the Current State of the VC Market
The VC market in Silicon Valley (and elsewhere in the U.S. and overseas) is currently extremely competitive. That should, however, not discourage startups. Apart from intensifying your capital raise efforts, the most important secret to success in this field is to make sure that your pitch will be the one that stands out from among the crowd. That is where Pitch Deck Writer can help. Start by letting us take a closer look at your current draft, free.