Research

Insight: Venture Capital Goes Urban

Venture capital has long powered new and innovative startup companies. For most of its history, venture capital investment has flowed to startups in suburban office parks. However, our research finds that venture capital investment and startup activity is experiencing a considerable reorientation toward urban areas.

This is just one of the key findings of Venture Capital Goes Urban, a new Martin Prosperity Institute study by Richard Florida and Karen M. King. The report uses detailed data from Thomson Reuters to identify which venture capital investments flow to urban and suburban neighborhoods. We further explore the location of venture capital investment and startup activity by the way people commute to work — looking at the share of workers who walk, bike, or use transit compared to those who drive their own cars to work.

The report looks at venture capital investment across the entire United States and in the three metro areas that receive the greatest amounts of venture capital: The San Francisco Bay Area, New York, and Boston-Cambridge. Together, these three regions account for nearly $20 billion in venture capital investment, 60 percent of all venture investment in the United States.

Density and Commute Share for the Top 20 Venture Capital Investment Neighborhoods

Zip CodeNeighborhoodMetroVenture Capital Investment*Urban vs. SuburbanDensity**Walk, Bike, or Use Transit
94103South of Market / Mission DistrictSan Francisco-Oakland-Fremont, CA$1,063Urban9,65961.2%
94105Rincon HillSan Francisco-Oakland-Fremont, CA$1,004Urban9,71859.6%
94301Palo AltoSan Jose-Sunnyvale-Santa Clara, CA$998Urban3,19421.3%
94107Potrero Hill / Dogpatch / South BeachSan Francisco-Oakland-Fremont, CA$885Urban7,66546.8%
92121Sorrento ValleySan Diego-Carlsbad-San marcos, CA$568Suburban13710.0%
94080South San FranciscoSan Francisco-Oakland-Fremont, CA$501Suburban2,04914.8%
02451Prospect Hill ParkBoston-Cambridge-Quincy, MA-NH$484Suburban1,35911.1%
94104Financial DistrictSan Francisco-Oakland-Fremont, CA$481Urban2,65492.1%
94025Menlo ParkSan Francisco-Oakland-Fremont, CA$430Suburban1,30912.7%
94043Mountain ViewSan Jose-Sunnyvale-Santa Clara, CA$416Suburban1,1589.5%
94041Old Mountain ViewSan Jose-Sunnyvale-Santa Clara, CA$392Urban3,89915.9%
94063Redwood CitySan Francisco-Oakland-Fremont, CA$378Urban1,28114.6%
02139Cambridge / MITBoston-Cambridge-Quincy, MA-NH$377Urban9,33164.3%
94065Redwood ShoresSan Francisco-Oakland-Fremont, CA$369Suburban1,9465.9%
75034FriscoDallas-Fort Worth-Arlington, TX$368Suburban4980.9%
94085SunnyvaleSan Jose-Sunnyvale-Santa Clara, CA$351Suburban2,1997.2%
02142MITBoston-Cambridge-Quincy, MA-NH$320Urban5,30065.0%
95054Santa Clara (north)San Jose-Sunnyvale-Santa Clara, CA$313Suburban1,3485.6%
10012SOHO / NYUNew York-Northern New Jersey-Long Island, NY-NJ-PA$310Urban41,29483.8%
94111Embarcadero / Financial DistrictSan Francisco-Oakland-Fremont, CA$306Urban6,87560.3%
*In millions of U.S. dollars
**Households per Square Mile

The table shows the top twenty zip codes for venture capital investment across the United States, including the degree to which they are urban or suburban and the share of workers who walk, bike, or use transit to get to work.

The majority of venture capital investment and venture capital backed startup activity takes place in urban areas with urban zip codes accounting for 54 percent of venture capital investment versus 45 percent going to suburban zip codes.

In New York, more than 80 percent of venture investment flows to urban zip codes; in the Bay Area roughly 60 percent of all venture investment flows to urban neighborhoods; and in Greater Boston 54 percent of investment is located in urban areas.

In neighborhoods that receive venture capital investment, nearly twice as large a share of workers walk, bike, or use transit to get to work compared to the national average (16.6 percent in venture capital neighborhoods versus 8.4 percent overall). Furthermore, more than a quarter of venture capital investment is concentrated in neighborhoods where more than half of all workers walk, bike, or use transit, and a third is located in neighborhoods where more than 30 percent do so.

Nearly 38 percent of all venture capital investment in the San Francisco Bay Area, New York, and Boston is located in neighborhoods where more than half of all workers walk, bike, or use transit to get to work. In the two neighborhoods in the United States that receive more than a billion dollars each in venture capital– both in downtown San Francisco — roughly 60 percent of workers walk, bike, or use transit to get to work.

Overall, our findings confirm that more venture capital investment is now located in urban areas as opposed to the suburban nerdistans of the past.

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