Halfpoint / Shutterstock.com

As investments shift from suburbs to cities, venture capital is moving to dense urban areas that are more walkable and served by transit.

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.

My latest MPI podcast recaps our recent findings.

Ultimately, our analysis reveals two big takeaways. The first is that more than half of all startup neighborhoods are urban, with 57 percent of startup companies and 54 percent of venture-capital investments located in urban ZIP codes. The second is that startup neighborhoods have considerably greater shares of commuters who walk, bike, or take transit to work. The share of workers who do so is nearly twice as high in neighborhoods with venture-capital-backed startups compared to the national average (16.6 versus 8.4 percent). In fact, a third of all venture-capital investment is located in neighborhoods with more than 30 percent of workers who walk, bike, or use transit when commuting, and more than a quarter of it is located in neighborhoods where more than half of workers do so.

Have a look at the table below, which shows the top neighborhoods, or ZIP codes, for venture-capital investment (it includes their density, as well as the shares of workers who walk, bike, or use transit to get to work). All together, roughly three times as many workers in these neighborhoods (25.9 percent) walk, bike, or use transit to get to work compared to the national average.

Neighborhood Metro Venture
Capital Investment (millions)
(households per sq. mile)
Bike, or Use Transit
South of Market/ Mission District San Francisco $1,063 9,659 61.2%
Rincon Hill San Francisco $1,004 9,718 59.6%
Palo Alto San Jose $998 3,194 21.3%
Potrero Hill/Dogpatch/South Beach San Francisco $885 7,665 46.8%
Sorrento Valley San Diego $568 137 10.0%
South San Francisco San Francisco $501 2,049 14.8%
Prospect Hill Park Boston-Cambridge $484 1,359 11.1%
Financial District San Francisco $481 2,654 92.1%
Menlo Park San Francisco $430 1,309 12.7%
Mountain View San Jose $416 1,158 9.5%
Old Mountain View San Jose $392 3,899 15.9%
Redwood City San Francisco $378 1,281 14.6%
Cambridge/MIT Boston-Cambridge $377 9,331 64.3%
Redwood Shores San Francisco $369 1,946 5.9%
Frisco Dallas $368 498 0.9%
Sunnyvale San Jose $351 2,199 7.2%
MIT Boston-Cambridge $320 5,300 65.0%
Santa Clara (north) San Jose $313 1,348 5.6%
Soho/NYU New York $310 41,294 83.8%
Financial District/Embarcadero San Francisco $306 6,875 60.3%

Next, we take an even closer look at venture-capital investment in the three leading regions across the United States—the San Francisco Bay Area, New York, and Boston-Cambridge—which together account for nearly $20 billion in venture-capital investment, or 60 per­cent of the national total. Nearly 40 percent of all venture-capital investment in these three regions is located in neighborhoods where more than half of all workers walk, bike, or use transit to get to work. 

San Francisco Bay Area

The San Francisco Bay Area—spanning Greater San Francisco and the Silicon Valley—is the nation’s leading center for startups and venture capital investment, attracting more than 40 percent of the national total. On the map below, purple reflects urban ZIP codes, darker blue indicates suburban areas, and lighter blue reflects rural areas. Note the cluster of dark purple circles in San Francisco proper, indicating the huge volume of venture capital flowing into urban neighborhoods. Roughly 60 percent of all venture capital investment in the Bay Area is located in urban ZIP codes, compared to 40 percent in the suburbs.

Isabel Ritchie

Our analysis finds large clusters of venture capital in and around downtown San Francisco. These clusters are primarily located in dense, transit-served neighborhoods near the University of California San Francisco, a leading center for biotech research. There is also a large cluster of venture-capital investment in Palo Alto near Stanford University, the densest and most urban area of the Silicon Valley. In total, nearly 20 percent (19.9 percent) of workers in Bay Area neighborhoods that receive venture-capital investment walk, bike, or use transit to get to work, compared to 14.6 percent for the entire region. In the Bay Area’s two leading metros—the Mission District and Rincon Hill—roughly 60 percent of workers walk, bike, or use transit to get to work, as shown on the table below.

Neighborhood Venture Capital Investment (millions) Density (households per sq. mile) Walk, Bike, or Use Transit
South of Market/Mission District $1,063 9,659 61.2%
Rincon Hill $1,004 9,718 59.6%
Palo Alto $998 3,194 21.3%
Potrero Hill/Dogpatch/South Beach $885 7,665 46.8%
South San Francisco $501 2,049 14.8%
Financial District $481 2,654 92.1%
Menlo Park $430 1,309 12.7%
Mountain View $416 1,158 9.5%
Old Mountain View $392 3,899 15.9%
Redwood City $378 1,281 14.6%
Redwood Shores $369 1,946 5.9%
Sunnyvale $351 2,199 7.2%
Santa Clara (north) $313 1,348 5.6%
Financial District/Embarcadero $306 6,875 60.3%
Sunnyvale $292 1,213 5.8%
Chinatown $261 28,252 71.4%
Cuesta Park/Blossom Valley $250 3,735 14.6%
Hayes Valley/Civic Center $228 25,103 68.9%
Los Altos Hills $222 405 7.1%
Foster City $222 3,223 6.2%


The next map shows the pattern for the nation’s second leading center of venture-capital investment, Boston-Cambridge, which attracts $3.4 billion, or roughly 10 percent of the national total. Of the top 20 neighborhoods in Boston-Cambridge, 11 are located in urban areas while nine are located in suburban areas. Venture-capital investment and startup activity are clustered in and around the urban core of Boston and nearby Cambridge around Massachusetts Institute of Technology (MIT) and Harvard. Overall, more than half (54 percent) of venture-capital investment in the Boston area is located in urban ZIP codes, compared to 46 percent in suburban neighborhoods.

Isabel Ritchie

Venture-capital investment is tightly concentrated along the transit lines that serve both Boston and Cambridge, but it also stretches out into the suburbs, especially in Lexington ($149 million), Bedford ($125 million), and Waltham to the west ($484 million), as the table below shows. All together, 23 percent of workers in Greater Boston neighborhoods that receive venture capital walk, bike, or use transit to get to work, compared to 18.3 percent for the entire metro.

Neighborhood Venture
Capital Investment (millions)
(households per sq. mile)
Walk, Bike, or Use Transit
Waltham $484 1,359 11.1%
Cambridge/MIT $377 9,331 64.3%
MIT $320 5,300 65.0%
Lexington $149 657 9.1%
Seaport District $143 1,231 51.8%
Watertown $126 3,658 19.7%
Bedford $125 375 3.6%
Back Bay $108 17,502 61.6%
North Cambridge $95 7,139 47.3%
Brandeis/Waltham $94 3,251 16.3%
Waterfront $83 5,665 72.0%
Burlington $77 792 5.0%
Cambridge $68 9,270 60.4%
Littleton $62 200 4.2%
Chinatown $56 12,745 70.4%
Acton $56 404 6.9%
Harvard $50 5,095 54.9%
Billerica $48 653 4.0%
Natick $48 900 10.8%
Franklin $40 413 11.3%

Greater New York

The map below shows the pattern for the Greater New York metro, which attracts $3.2 billion, or roughly 10 percent of the national total. A whopping three-quarters of the top 20 New York neighborhoods that received venture capital are classified as urban (a far greater share than in the Bay Area or Boston-Cambridge). As expected, there is a heavy concentration of venture capital in Lower Manhattan, and more than 80 percent of venture-capital investment is located in urban areas.

Isabel Ritchie

In 15 of the region’s top 20 neighborhoods for venture-capital investment, more than three-quarters of commuters walk, bike, or use transit to get to work, especially in neighborhoods like Kips Bay/Murray Hill, the Garment District, and Midtown East in Manhattan. Venture capital is also located along the transit and rail lines that serve the broader metro region, such as South Plainfield, New Jersey ($71 million), Bedminster Township ($67 million), Morris Plains ($40 million), and Scarsdale, New York ($33 million). More than half (56.9 percent) of workers in neighborhoods that receive venture capital investment walk, bike, or use transit to get to work, compared to 36.7 percent in the entire New York metro.

Neighborhood Venture
Capital Investment (millions)
(households per sq. mile)
Bike, or Use Transit
Soho/NYU $310 41,294 83.8%
Tribeca/Hudson Square $267 21,913 80.5%
Gramercy Park $261 42,343 79.3%
Chelsea (north) $244 17,763 81.0%
Chelsea (south) $198 46,040 82.1%
Kips Bay/Murray Hill $197 60,476 84.5%
West Village $194 34,780 79.6%
Hell's Kitchen/Theater District $178 34,373 83.4%
Gramercy Park/East Village $167 49,582 82.3%
Garment District $133 9,519 86.2%
Brooklyn Heights $125 16,415 80.8%
Midtown East $78 33,634 85.8%
South Plainfield $71 949 4.8%
Bedminster Township $67 206 5.1%
Madison Square Garden $61 n/a n/a
Washington Heights $46 30,788 78.5%
Southern Tip $45 3,021 83.4%
Tribeca/Civic Center $42 17,423 76.4%
Warren $42 259 4.1%
Morris Plains $40 810 3.8%

Ultimately, our findings demonstrate a marked shift of startup activity and venture-capital investment from suburban “nerdistans” to dense urban areas, where more people walk, bike, or use transit to get to work each day. My previous posts have shown that startups and venture capital are increasingly concentrated in the Bay Area and New York City. But beyond this broad clustering of innovation, startups and venture capital are massively concentrated in a small number of increasingly dense urban neighborhoods. Next week, I will take a detailed look at venture-capital backed startups by ZIP code and leading industry.

Top image: Halfpoint / Shutterstock.com

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