Startups and Venture Capital Are Going Urban

The iconic image of high-tech industry—as viewers of the HBO series Silicon Valley are well aware—is a suburban office park off a highway interchange. For decades, these so-called suburban “nerdistans” were the preferred location for high-tech startups and their workers. But the past few years have seen a striking urban shift in high-tech startups and venture-capital investment. As my latest research has shown, the United States is home to two billion-dollar venture-capital neighborhoods—both of them in downtown San Francisco.

Today, I drill down further into this urban shift, summarizing the key findings of a new analysis I co-authored with my Martin Prosperity Institute (MPI) colleague Karen King. Our study uses detailed data from Thomson Reuters to identify venture-capital investments that flow to dense, walkable, and transit-friendly neighborhoods based on ZIP codes. We identify urban neighborhoods as those with more than 2,200 households per square mile, a threshold originally documented by economist Jed Kolko. This is a big advance over previous research, which has been hampered by highly aggregated data available only at the regional or metro level.