What’s The Easiest Place To Raise Early Startup Capital? Hint: Not Silicon Valley

We analyzed VC fundraising stats from various regions to see where it’s easiest (and hardest) to raise money and exit.

We compared 8 different tech hubs (4 within the US and 4 international):

• Silicon Valley
• Boston
• NY
• LA
• China
• Germany
• India
• United Kingdom

Among our unexpected findings, we learned it’s easier to raise a 2nd round of financing in NY or Boston vs Silicon Valley.  

Here are some other things that jumped out:

• It’s much easier to raise a 2nd round of funding in the US than outside the US
• The Boston Metro area was the top area for raising a 2nd round of funding.
• The New York Metro area saw the greatest share of companies exit before raising a 2nd funding round. New York also saw the highest overall exit rate at 35%.
• Silicon Valley produced more unicorns and more mega exits ($100M+) than any other region.
• Los Angeles companies were less likely to raise a 2nd round of funding than in other US regions. However, LA saw less average time between rounds than other US regions.
• Germany was the top region outside the US for raising a 2nd round of funding. It also saw highest overall exit rate of all non-US regions.
• Chinese companies raised follow-on funding faster than all other regions. Chinese companies also raised significantly larger rounds, typically 50 – 200% the size of rounds in the other regions.
• India saw the lowest rate of companies funded between the seed and Series A rounds. It was also the only region to see a decrease in median round size — median investment dropped from $32M in round 4 to $15.2M in round 5.

For details on our methodology and how we analyzed our cohort, please see our methodology section at the end of the post.

Using CB Insights data, we dug into funding trends for eight select regions. This research brief covers:

• Likelihood of Raising Each Round of Funding by Region
• Average Months Between Funding Rounds by Region
• Median Round Size by Region
• Exit Rates by Region

The regions analyzed in further detail are as follows:

• Silicon Valley Metro Area
• New York Metro Area
• Boston Metro Area
• United Kingdom

Our criteria and methodology for this analysis can be found here:

• VC Funnel Methodology

For reference, we’ve included our past Venture Capital Funnel analysis:

• March 2017 US Venture Capital Funnel
• December 2015 Venture Capital Funnel

Funding & Exit Rates Across Regions

The following analysis provides a high-level view of follow-on rates, average duration between rounds, median round sizes, and exit rates for eight different regions. All data was surfaced and analyzed using the CB Insights platform.

Likelihood of raising each round of funding By region

• The Boston Metro area saw the greatest percentage of seed funded companies raise a Series A round. The cohort of companies from the Boston Metro area achieved an initial follow-on rate of 68%, higher than Silicon Valley and the New York Metro area.
• India saw the lowest percentage of companies funded between the seed and Series A rounds. At 45%, more than half of the companies in the region failed to raise follow-on funding — the only cohort where less than 50% of companies raised follow-on funding.
• Germany, the New York Metro area, and the Silicon Valley Metro area all saw 3% of companies raise a 6th equity follow-on round (Series E), higher than all other regions. However, in early rounds Germany saw a below-average percentage of companies funded.

Average Months between funding rounds By Region

• Chinese companies raised notably faster than other regions. On average, Chinese companies raised follow-on funding 16 months after initial seed funding — 4 months faster than Silicon Valley and twice as fast as Germany. China continued the faster-than-average tempo through 5 rounds, but did not see any companies raise a 6th round.
• German and UK companies raised follow-on funding slower in early rounds. However, pace accelerated in later rounds when holding companies and asset managers became active.

Median Round Size By Region

• Chinese companies raised significantly larger rounds on average, between 50 – 200% the median size of rounds in the other regions analyzed.
• While India witnessed lower median round sizes early on, median round size grew in later rounds. However, India was the only region to see a decrease in median round size at some point in the funding funnel. Median investment dropped from $32M in round 4 to $15.2M in round 5, and then rose again to $57M in round 6.

Exits rates by region

• While an exit doesn’t necessarily imply a successful investment, the New York Metro area saw the highest exit rate after first round funding, at 16%. It also maintained high exit rates throughout the funnel, achieving the highest exit rate at rounds 2 (tied with Boston Metro and Germany) and 3.
• The New York Metro area achieved the highest overall exit rate at 35%.
• The Boston Metro area achieved its highest exit rate after 2 rounds, at 11%. All other regions witnessed the highest number of exits after 1 round.
• The Los Angeles, New York, and Silicon Valley Metro areas were the only regions to witness exit activity after 5 rounds.
• Chinese companies, despite larger median round sizes and frequent funding, saw the lowest exit rate overall at 7%.

Regional Analysis

Below we examine the venture capital funnel by region in Silicon Valley, the New York Metro area, the Boston Metro area, and United Kingdom.

Silicon Valley

The Silicon Valley Metro cohort included 536 companies that raised initial funding between 2009 and 2011. They collectively raised nearly $15.4B in total disclosed equity financing (through 6 rounds).

Key funding and exit trends in the Silicon Valley Metro area:

• Nearly one-quarter — 129 companies in total — failed to raise follow-on funding and did not exit.
• Funding jumped from $390M in seed funding to over $2.4B in Series A funding reflecting a 515% increase — the second most drastic jump in funding across all rounds and geographies.
• The 4th round (Series C) saw over $3.7B in disclosed funding, more than any other round. Totals then declined due, in part, to fewer companies still in the funnel. The cohort was cut from 101 to 35 companies between the 4th and 5th rounds.
• 175 companies, or 33% of the cohort, exited overall. 71 of the 175 exited after initial financing.
• There were over 10 unicorns from this cohort, more than any other region. Airbnb, Slack, Stripe, and Uber are 4 of the most notable.
• Approximately 3% of companies exited for over $100M including Nutanix ($2.18B), Twilio ($1.23B), and Instagram ($1B), among others.

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