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January 4th, 2024
Lynn Johannson, President of E2 Management Corporation and Catalyst for THE Collaboration
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Decentralization of Startups (and Capital) Spur Economic Growth and New Startup Cities Across the U.S.
TNW | Alejandro Tauber | Feb 7, 2022
It’s no big secret that the US tech hubs of yore – San Francisco, New York, and Silicon Valley – have been facing increasingly stiff competition over the past decade when it comes to attracting the hottest new tech startups and scaleups.
While the relative contribution of those cities in terms of newly created unicorn companies peaked in 2014, the rest of the US steadily accumulated more VC funding, leading to faster growth of new tech hotspots. All over the continent and the globe, new tech hubs are emerging, each with their own specializations, ecosystems, and unique features for attracting fledgling tech companies.
See: On-chain capital is the future of startup funding
And the pandemic has only escalated this tech ‘decentralization’ further with the prospect of indefinite work-from-home-life allowing tech workers to get away from rising major city prices. This is creating new momentum for cities that want to gain a tech advantage.
We decided to take a deeper look into what’s driving the decentralization of tech in the US and how blossoming startup communities can benefit.
Location-independent capital
Investors aren’t necessarily investing in the major tech hubs, they’re investing everywhere.
“Just look at Hopin, which was built completely remotely and became the fastest billion dollar company ever. For the longest time, they didn’t have a physical office,” he tells us, illustrating that investors are, “seeing opportunities to expand into new markets, like finding new investment opportunities in Europe, in smaller US cities, and in emerging markets. And that’s what we can see from the data.”
With investment in innovative companies reaching a record €246 billion in the first half of 2021 — a year over year increase of 230% — there is a lot of money available. Money that’s finding its way into completely new territories, and compounding the growth of burgeoning startup ecosystems.
See: Startup Genome: Canada Ranks 14th in The Global Startup Ecosystem Report 2021
Stauffer tells us that the main factor driving investors to seek opportunities farther from home is access to data.
Startups equal job growth
The decentralization of capital is also giving founders more flexibility in deciding where they want to set up shop. Non-astronomical costs of living, access to previously untapped workforces, a more favorable tax climate, and higher acceptance of remote work are just a few reasons some tech companies are choosing to settle off the beaten path.
So it makes sense for cities of all sizes to invest in creating a welcoming environment for tech companies, and to understand what the community needs. And this goes for cities of all sizes.
See: Experiential or Alternative Education: Training tech talent for startups
For too long now major cities have been the sole beneficiaries of the tech boom and the drivers of innovation. But the decentralization of capital, tech workers, and startups are providing new opportunities to spur economic growth across the country. It’s uncertain what the long term impact of decentralization in the US could be (Greater resistance to economic disruptors like Covid? More equal wealth distribution? An increased rate of innovation?) But what is clear is that those cities ready to take advantage of this momentum will come out on top.
Continue to the full article --> here
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