AngelList analyzed the IRR for almost 2,500 transactions dating from 2013
Technological innovation becomes more widely distributed in the United States.
Among the five startups launched in 2020 that raised the most funding, four were based outside the Bay Area. Prominent VCs like Keith Rabois from the Founders’ Fund, David Blumberg from Blumberg Capital, and Joe lonsdale 8VCs have left the Bay Area to settle in new emerging technology hubs, which AngelList defines as Austin, Texas; Seattle; Denver; Portland, Oregon; Brooklyn, New York; Nashville, Tennessee; Pittsburgh; and Miami.
The number of syndicated transactions on AngelList in emerging markets has grown by 144% over the past five years.
The number of startups in these emerging markets is growing rapidly, according to data from AngelList, and increasingly getting a bigger slice of the VC pie.
AngelList compared the performance of startups based in emerging technology hubs to startups in Silicon Valley by the internal rate of return (IRR), which measures the rate of growth generated by those investments. AngelList defines “Silicon Valley” as San Francisco, Palo Alto, Mountain View, Oakland, San Mateo, Berkeley, Redwood City, Menlo Park, San Jose, Santa Clara, Sunnyvale, Burlingame, and San Carlos.
According to AngelList data, startups in emerging technology hubs have an overall IRR of 19.4% per year on syndicated deals on AngelList. Syndicated deals on AngelList in Silicon Valley have an overall IRR of 17.5% per year.
The Total Value of Payments Paid (TVPI), which is the return multiple of net fees, is also slightly higher for AngelList deals in emerging technology hubs (1.67x) than for Silicon Valley (1.60x). This means that for every dollar invested in startups based in emerging technology hubs, the investor’s portfolio is now valued at $ 1.67, compared to $ 1.60 for startups in Silicon Valley.
This data is based on a sample of nearly 2,500 syndicated transactions on AngelList dating back to 2013, with returns to date as of January 1, 2021.
Investors we spoke to presented various reasons for the rise of these emerging tech hubs, including cheaper taxes outside the Bay Area, a lower cost of living, and a wider distribution of talent brought about. by the COVID-19 pandemic.