Silicon Valley as the center of the universe for venture capital and value creation is both an objective truism and a victim of confirmation bias. The origin story of Silicon Valley as the epicenter of innovation began ~70 years ago in 1955 with Shockley Semiconductors Laboratory. Since then, it has served as the de facto magnet for top talent from all over the world interested in building new technologies.
On one hand, it is easy to agree Silicon Valley will continue to serve as the global center of startups and venture capital. It has a multidecade lead on every other hopeful ecosystem and consistently produces worldchanging solutions to problems of all shapes and sizes. On the other hand, it remains geographically isolated from the vast majority of the U.S. population, and therefore customers and talent.
Introducing Silicon Valley, USA
What happened when 56 million people redistributed across the U.S. in ‘The Great Relocation’ of 2020 and 2021? Thousands upon thousands of people from across Silicon Valley’s elaborate ecosystem dispersed across the country for the first time in a post-technology world, a marked change from an otherwise consistent story of ecosystem growth since 1955.
In short, knowledge and networks broken off from Silicon Valley’s motherboard arrived post-COVID in metropolitan areas spanning the U.S.
Experienced CEOs, startup founders, angel investors, corporate executives, VCs, PE investors, academics, scientists, product leaders, marketers, technologists, sales leaders, and so forth landed in places like Nashville, Raleigh-Durham, Atlanta, Austin, Dallas-Ft. Worth, Charlotte, and the list continues. LinkedIn profiles may still read ‘San Francisco’ or ‘New York’ though home and work are now many miles away.
The result of this significant rearrangement of talent nationally will be a 2.0 era of company building beyond Silicon Valley, bringing together relocated and homegrown talent with localized networks and national reach to create something entirely new and at a different scale.
I wrote about 1.0 a few years back in a TechCrunch op-ed entitled, ‘VC meets the land of opportunity’ where I challenged the assumption that all VC-worthy innovation was limited to a relatively small geographic footprint of SF-Silicon Valley and surrounding suburbs. How could every viable idea originate from a relatively limited geographic footprint lacking meaningful connectivity with the rest of our sprawling country?
COVID-induced Zoom calls flattened the earth for a moment and VCs poured into my inbox seeking deal flow from Nashville and the broader Southeast, proclaiming, ‘We are now interested in geographies beyond Silicon Valley’. VC firms added pins to the map of their portfolio amid a bull run market reaching an eventual fever pitch and correction as the IPO market froze over in January 2022. It took 6 months for the impact to trickle down to Series A funding, then another 3 months or so to reach seed deals. The pullback shifted priorities and risk tolerance back to safety, mostly local Silicon Valley entrepreneurs with logos on their resume.
Rise of the New American South
However, one important trend held true – relocated talent mostly stayed put, enabled by homes purchased, newfound proximity to family and friends, a shift in lifestyle preferences, with the conveniences of home extending to these growing metropolitan cities.
As venture funding pulled back globally, the share of U.S. venture funding contracted in the West, stayed flat in the Midwest, and grew in the South and Northeast, as illustrated by Carta in the below chart.
We won’t know the return potential of capital raised in 2023 and beyond for several years, though it is worth noting the share of capital raised in the South doubled from 2018 to 2023, a greater growth rate than any other U.S. region.
Having met hundreds if not thousands of startups across the South since moving to Nashville in 2017, I can say anecdotal evidence points to greater capital efficiency than is demonstrated by startups in established cities like Silicon Valley and New York. In some cases, the largest outcomes come from capital-efficient businesses not requiring growth investment once the company reaches scale. And with the proliferation of knowledge and expertise relocated across the country, it seems likely there will be a steady increase in outsized outcomes.
Meanwhile, a greater number of entrepreneurs building in places like the New American South requires a greater number of eligible investors to fuel solutions for our collective future.
Introducing Daytrip Ventures
Daytrip will invest in pre-scale (pre-seed and seed) companies building across the New American South, the fastest growing region in a Silicon Valley, USA era. As the first purpose-built fund for relocated and homegrown talent, we are building a new kind of network for regional peer community, talent sourcing, and access to diverse capital sources.
To learn more about us, check out: Introducing Daytrip Ventures.