A more fine-grained look at the geographic centers of start-up investment.
Venture capital is the fuel that drives America's high-tech innovation machine. In previous posts I've examined venture capital investment and start-ups at the metro level, tracking overall levels of activity and investment, per capita trends and the factors that are associated with venture capital and start-up activity. Today, I turn to a finer-grained level of geographic detail, exploring venture capital and start-up activity across telephone area codes.
Our analysis of area codes sheds additional light on the distribution of venture capital and start-up activity across urban and suburban areas. Previous studies, including my own, have been limited by the highly aggregated nature of venture capital data. While area codes are imperfect geographical units, they allow us to examine venture capital investment on a smaller scale than metros. The data provided to me by the National Venture Capital Association (based on data from Thomson Reuters) covers the 181 U.S. area codes that had venture capital activity in 2012. Zara Matheson of the Martin Prosperity Institute mapped the data.
The first map (above) charts the number of venture capital deals by area code. Not surprisingly, the largest concentrations are on the West and East coasts, in Silicon Valley and the San Francisco Bay Area, Los Angeles and Southern California and Seattle, and the Boston-New York-Washington corridor back East, with smaller concentrations in Austin, Denver, North Carolina's Research Triangle, Pittsburgh and several other areas.
|Leading Area Codes for Venture Capital Deals|
|Rank||Area Code||Cities||# of Venture Capital Deals|
|1||650||Silicon Valley: Palo Alto, Mountain View, Sunnyvale and Los Altos||457|
|2||415||San Francisco and Marin||410|
|4||617||Boston, Cambridge and inner suburbs||237|
|5||408||Silicon Valley: San Jose, Sunnyvale, Santa Clara, CA||196|
|6||310||West LA – Brentwood, Bel Air, Beverly Hills, Santa Monica, Manhattan Beach, Venice, Malibu||128|
|7||781||Route 128 suburbs outside Boston||109|
|9||512||Austin and surrounding area||87|
|10||206||Seattle, Mercer Island, Bainbridge Island and Vashon Island||87|
|11||858||San Diego, La Jolla, Del Mar and surrounding area||86|
|12||412||Pittsburgh and surrounding area||71|
|13||510||Berkeley, Oakland, Emeryville and surrounding area||70|
|14||703||Northern Virginia suburbs of Washington, DC||60|
|15||610||Philadelphia Main Line suburbs, Allentown, Bethlehem and Reading||60|
|19||949||Orange County – Irvine, Newport Beach, Laguna Beach||41|
|20||801||Salt Lake City, Provo and surrounding areas||41|
|21||215||Philadelphia and close-by suburbs||38|
|22||508||Southeastern, Southcentral Massachusetts, Cape Cod, Martha’s Vineyard and Nantucket||29|
|23||805||Santa Barbara and Ventura||28|
|24||919||Research Triangle, NC: Raleigh, Durham, Cary, Chapel Hill||28|
|25||301||Maryland suburbs of Washington, DC||28|
The table above lists the top 25 area codes for venture capital deals. Silicon Valley, of course, takes first place – the 650 area code that includes Palo Alto, Mountain View, Sunnyvale and Los Altos. But, right behind it is the 415 area code that covers the city of San Francisco. Manhattan’s vaunted 212 area code is third. The 617 area code for the Boston-Cambridge area is fourth. Another Silicon Valley area code, the 408 area code, is fifth. West L.A.’s 310 area code – including Brentwood, Bel Air, Beverly Hills and especially Venice and Malibu – is in sixth place; Denver-Boulder, Austin and Seattle round out the top ten. The rest of the top 25 include urban areas like Berkeley-Oakland-Emeryville, downtown Chicago, Philadelphia, and Pittsburgh, as well as such classic suburban nerdistans as Northern Virginia and the North Carolina Research Triangle.
The second map (above) charts the dollar value of venture capital investment by area code. The same general pattern stands out, with the most substantial concentrations in Silicon Valley and the San Francisco Bay Area, in Southern California and along the Bos-Wash corridor.
|Leading Area Codes for Overall Venture Capital Investment|
|Rank||Area Code||Cities||Venture Capital Investment (millions)|
|1||650||Silicon Valley: Palo Alto, Mountain View, Sunnyvale and Los Altos||$4,067|
|2||415||San Francisco and Marin||$3,686|
|3||408||Silicon Valley: San Jose, Sunnyvale, Santa Clara, CA||$2,024|
|5||617||Boston, Cambridge and inner suburbs||$1,560|
|6||858||San Diego, La Jolla, Del Mar and surrounding area||$1,057|
|7||781||Route 128 suburbs outside Boston||$1,057|
|8||510||Berkeley, Oakland, Emeryville and surrounding area||$832|
|9||310||West LA – Brentwood, Bel Air, Beverly Hills, Santa Monica, Manhattan Beach, Venice, Malibu||$677|
|10||512||Austin and suburbs||$626|
|11||206||Seattle and Mercer Island, Bainbridge Island, Vashon Island||$587|
|13||714||Orange County – Irvine||$441|
|14||805||Santa Barbara and Ventura||$354|
|16||425||Bellevue, Redmond and Seattle suburbs||$319|
|17||949||Orange County – Irvine, Newport Beach, Laguna Beach||$316|
|18||801||Salt Lake City, Provo and surrounding areas||$310|
|19||925||East Bay Area||$272|
|20||703||Northern Virginia suburbs of Washington DC||$245|
|22||610||Philadelphia Main Line suburbs, Allentown, Bethlehem and Reading||$204|
|23||908||North-central New Jersey||$186|
|24||919||Research Triangle, NC: Raleigh, Durham, Cary, Chapel Hill||$184|
|25||508||Southeastern, South-central Massachusetts including Cape Cod, Martha’s Vineyard and Nantucket||$180|
The same general pattern emerges when we look at the top 25 area codes for venture capital investment. The top area code is again Silicon Valley’s area code 650, with a little more than $4 billion in venture capital investment. But San Francisco’s 415 area code is a close second with $3.7 billion. Area code 408, also in Silicon Valley, is now third with roughly $2 billion. Manhattan’s 212 area code is fourth with $1.7 billion; and the 617 area code for Boston-Cambridge is fifth with $1.6 billion. The rest of the top 25 include a number of urban areas – like Berkeley-Oakland-Emeryville, West L.A., downtown Chicago, and Philadelphia – as well as suburban areas in Northern Virginia, the Route 128 suburbs of Boston, the Research Triangle, and others.
This area code analysis sheds additional light on the geography of venture capital and start-up activity. It is particularly useful to help define the geography of venture capital investment in the Bay Area regions, especially the split between Silicon Valley, the suburbs, and San Francisco proper. After my third post in this series, Patrick Hoge of the San Francisco Business Times engaged me in a thoughtful email exchange about my conclusion that San Francisco had topped Silicon Valley as the nation’s number one center for venture capital. In that post I used data from the National Venture Capital Association and Thomson Reuters to compare venture capital activity and investment in San Francisco-Oakland and San Jose, according to the standard definition of those metro areas. But using that definition of the San Francisco metro area, Hoge wrote to me, includes such jurisdictions as “Redwood City, Foster City, Menlo Park – all Peninsula cities long considered part of Silicon Valley – as well as Fremont, Dublin and Pleasanton, all of which are significantly closer to San Jose both physically and one could argue spiritually, in terms of urban planning. The area code data helps us better zero in on these geographical distinctions. As Hoge noted, "415 largely equals San Francisco when it comes to venture capital, as Marin County is a relatively minor venue. 415 has risen over time, but 650 – which includes the Peninsula cities mentioned above – continues to dominate."
While Silicon Valley continues to be the number one center for venture capital investment based on our analysis of the area code data, there is also considerable activity in San Francisco and urban areas in New York, Boston, Chicago and Philadelphia. This latter trend is suggestive of an ongoing shift in venture capital and start-up activity from a long-standing focus in suburban areas to urban neighborhoods.
In my next post, I’ll use zip codes to drill down even deeper into the suburban/urban breakdown of venture capital within some of the nation’s leading tech regions, including Silicon Valley and the Bay Area, Greater New York, Boston, LA, Seattle, Washington, D.C. and more.
All maps by the Martin Prosperity Institute's Zara Matheson.
This is the sixth in a series of posts exploring the new geography of venture capital and high-tech start-ups, and the degree to which these start-up communities are shifting from their traditional locations in the suburbs to urban areas.