Where in the world is all the venture capital (VC)? In my last post, I talked a bit about different ways startups raise funds. I also outlined equity crowdfunding as a possible alternative to traditional VCs. In particular, I wrote that equity crowdfunding makes sense when you live in a country that does not have a well-developed VC community, or just lacks VCs in a specific area, like the sharing economy. I’ve decided to give a brief overview of the state of VCs worldwide. If you’re an aspiring entrepreneur, do some research and decide if your country’s VC community can support your idea!
The United States Dominates
If you’ve been in the startup game for awhile, it shouldn’t be a surprise that the United States receives the lion’s share of global VC investment. In fact, the San Francisco Bay Area and the Northeast Corridor extending from Washington D.C. to Boston together account for more than 40% of total venture capital investment.
Other large metropolises like Mumbai, London, Beijing, Moscow, Stockholm, and Shanghai also see large amounts of VC investment. There isn’t a magic formula that creates ideal conditions for a startup community. While the U.S is traditionally known as the “land of opportunity”, other unlikely places have arisen as centers of investment and growth.
The Stockholm Success Story
Stockholm has proven to be one of the most surprising centers of entrepreneurship and startup growth in the past decade. In fact, Stockholm produces the second highest number of billion-dollar tech companies per capita, after Silicon Valley.
The explanation for the high survival and growth rate of startups is Sweden’s robust social safety net. While high tax rates may discourage skilled immigration from lower-tax, Western nations, they provide benefits to Swedes that incentivize entrepreneurship. More specifically, Swedish entrepreneurs don’t have to worry about losing their healthcare should their startup fail, as they’re guaranteed coverage by the government. A young entrepreneur with a great, new idea doesn’t have to worry about student loans after completing their degree program. Instead, they can get started building their idea right out of the gate. They can even compete for funding from the government!
What Does This Mean For The Future?
For the immediate future, it looks like San Francisco and the American Northeast will continue to dominate global VC investment. However, smaller, tightly knit startup communities have started to form elsewhere. The Nordic startup scene, in particular, has an active community of entrepreneurs and startup team members. Perhaps more attention will be paid outside the U.S. as these communities grow, or if location-specific conditions, like the size of the sharing economy in the Netherlands, attract foreign investment