Simply How Troubled is the Bay Space Startup Scene? by @ttunguz

There’s a prevailing narrative that the well being of the Bay Space startup ecosystem faces challenges. San Francisco’s share of startup rounds by rely has fallen from its perch ten years in the past. However that’s not the complete story.

In 2021, San Francisco Bay Space startups raised $126b. In 2019, US startups raised $126.4b. Within the span of two years, a area’s startups raised as a lot capital as all the US.

Throughout this identical interval, the US enterprise business grew 41x from $8.8b to $360b invested per yr.

It’s true that throughout all phases, SF’s share of enterprise rounds has fallen 15%. In Sequence Seed, A, & B rounds, the deficit measures 30%. One would possibly conclude different geographies have siphoned San Francisco’s {dollars}.

In greenback phrases, San Francisco’s stake of the early US enterprise market eked 5% decrease than 10 years in the past.

However, 2022 noticed a swing upwards, reversing a three-year decline. Bay Space startups claimed of 55% whole {dollars} up from 45% in 2012.

The problem with taking a look at relative share is we see just one leg of the elephant.

Whereas SF based mostly firms’ spherical share could have declined, the mixture {dollars} infused into the Bay Space ecosystem grew from $1.4b per yr to $30b-$36b per yr.

Extra financings happen exterior San Francisco, however Bay Space firms now increase 2000 to 2500 rounds per yr, up from 404. Plus, SF startups increase 26x extra capital to develop than a decade in the past.

To color one geography’s success as a loss for one more manifests a false causality.

It’s not that VC {dollars} have left San Francisco to gas different geographies. Relatively, the massively exothermic enterprise market has expanded inside & past San Francisco. Regardless of the correction in VC this yr, $284b of latest enterprise {dollars} will bolster American startup steadiness sheets – the second largest yr ever, eclipsed solely by 2021.

That’s one thing we are able to all toast to : the well being of Startupland broadly.

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