PitchBook News - The concentration of VC

Between the two markets, more than $330 billion in capital was raised by VCs from 2019 to 2022. VCs in the rest of the US raised less than half that total, begging the question: Is venture destined to become siloed into these two markets and everywhere else?

One of the market trends accelerated by COVID was the further spread of capital outside of tech hubs. During lockdowns, it was just as easy to invest in a company headquartered across the country as one in the same ZIP code. In fact, the median distance in miles between a company and the lead investor in its seed round grew from 151 miles in 2019 to 401 miles in 2021.

When the market quickly turned against startups in 2022, the thought was that investors would return to traditional deployment strategies, pulling capital back toward their headquarters and leaving startups in markets with limited capital resources in a difficult spot for fundraising.

If that were the case, then the concentration of capital in the Bay Area and New York would put the leverage firmly back into those markets, potentially stunting the further democratization of VC and reverting to investment trends prior to the pandemic.

What we're seeing, however, is Bay Area and New York VCs pushing their investments further into new markets as companies continue to build outside those two hubs.

For more data and analysis: check out our research note: Capital Concentration and Its Effect on the VC Ecosystem