CONTENTS EXECUTIVE SUMMARY 2 ARE BAY AREA FIRMS LOOKING ELSEWHERE? 3 WHERE ARE THEY GOING? 4 ARE THERE NEW INVESTORS IN OUTSIDE ECOSYSTEMS? 5 WHERE DO THINGS GO FROM HERE? 6 CITY SPOTLIGHTS 7-12 EXECUTIVE SUMMARY t Revolution, we have long encouraged others within the KEY TAKEAWAYS venture industry to challenge their preconceived notions Aabout where innovation is possible. We knew investors And what we found was validating. Our analysis reveals that investor could find compelling investment opportunities in cities across interest is increasingly tipping towards “rising cities.” The data shows the country, especially as more entrepreneurs sought to start that the proportion of early-stage VC dollars going to Bay Area companies in cities where sector expertise already existed. We startups has been on a steady decline. In 2021, that ratio is on pace called it Rise of the Rest. What began as a clarion call more than a to be below 30% for the first time in more than 10 years. And that’s decade ago, morphed into a nationwide bus tour of rising cities in despite the fact that 2021 is turning into a record year for the VC 2014, and then became its own seed-stage venture fund within the industry. We also found a significant increase in the number of active Revolution family in 2017. VC firms outside of the Bay Area, forming a new local investment network for startups in emerging startup ecosystems. After traveling more than 11,000 miles across the country to visit more than 40 cities by bus, and subsequently investing in more However, while the data tells a valuable story, it’s not the whole than 170 early-stage startups—with more than 300 institutional picture. The charts and tables in this report represent the hard work co-investors—the sense that momentum was building for our of people in cities across the US—people we’ve had the privilege of once-contrarian investment thesis felt palpable. But the headline backing or investing alongside. data seemingly refused to budge. Year after year, venture industry reporting delivered the same statistic: Approximately 75% of venture Some may have called us crazy for hopping on a bus to explore far- capital (VC)investment dollars continued to go to just three states: flung startup communities, but that has proven to be time well spent. California, New York, and Massachusetts. Silicon Valley has been successful, in large part, because of the robust network density that exists there. Rising cities require the same strong, As is the case with so many things in tech today, however, the collaborative networks to support scaling startups, but building them pandemic seemingly accelerated interest in venture investing takes time and effort. Meeting founders on Zoom has made investing throughout the country, rather than in just a select concentration outside the Valley easier for VCs, but that’s no substitute for getting of locales. on a plane (or bus) to connect with entrepreneurs face-to-face and the diverse communities of investors, corporations, and universities that With that as a backdrop, we partnered with PitchBook Data to look support them. beyond the headlines and see where venture dollars—early stage in particular—were really going. Revolution Chairman & CEO Steve Case and the Rise of the Rest Team 2 / Beyond Silicon Valley: Coastal dollars and local investors accelerate early-stage startup funding across the US