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PitchBook Analyst Note: VC Ecosystems

2Q 2018

PitchBook Analyst Note: VC Ecosystems

June 25, 2018

PitchBook Analyst Note: VC Ecosystems
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To supplement PitchBook analysis on venture investment activity, this report introduces a framework for deeper evaluation of venture ecosystems in the United States. Building extensively on existing industry research, we present three key indicators of ecosystem development: density, resources and talent. While this report is just a starting point for comparing factors of development, we hope to address the lack of data and research in private markets by providing readers a new lens with which to understand venture ecosystems. 

Key highlights:

  • Few states have developed late-stage ecosystems. Many smaller ecosystems have a healthy density of early-stage startups but lack a concentration of late-stage companies. While states with low late-stage density also have fewer exits, healthy early- and very early-stage vitals could indicate potential for growth.
  • Proximity to capital is expensive. States with the most access to local capital ($2.5 million+ per venture-backed startup) also have higher costs of labor and housing relative to the national average. States with slightly less capital per startup (around $1 million per venture-backed startup) have costs closer to the mean, while regions with low values of local venture capital also have the lowest costs.
  • Entrepreneurial experience is relatively equal across states, but talent clusters. Regarding local talent, the proportion of startup founders who previously founded another company hovers around 3%-5% in most states, indicating relative equality in entrepreneurial experience. Local talent retention is more variable, however. The proportion of startups with founders who studied at a four-year institution in-state appears to be strongest in regions with top-tier colleges and universities.