On the slow erosion of Silicon Valley’s dominance
When I moved to San Francisco in 2012, it was the place to start a venture-backed technology startup. Everyone knew that Silicon Valley attracted the best software developers, the best entrepreneurs, the best venture capitalists, and all the other A-players necessary for a thriving startup ecosystem. Getting accepted into Y Combinator that year and raising millions of dollars for my YC startup from top-tier VCs validated my decision to move to this startup mecca.
While Silicon Valley still attracts many of the world’s best and brightest, I’ve watched its dominance slowly erode over the years, a trend that has only been accelerated by the COVID-19 crisis.
At Rebel Fund we’re in a unique position to follow this trend, since we only invest in Y Combinator startups and therefore collect extensive information on nearly every company going through YC, including its location. Our data shows that while Silicon Valley continues to dominate the startup ecosystem, especially San Francisco proper, its dominance is slowly eroding.
Below is the location breakdown of startups that we tracked in the Y Combinator Summer 2019 (S19) batch, Rebel’s first investing batch:
As you’ll see, San Francisco dominates, representing almost half of all the companies in the batch. The next largest location is NYC, but representing only 4% of the batch.
In the next Y Combinator batch in Winter 2020 (W20), we still see San Francisco dominating, but now representing only 42% of the startups that Rebel tracked:
You can also see visually above that the curve is slightly flatter, with NYC, LA, and Mumbai & Bangalore, India, all holding their own. Note that W20 was the last batch in which YC selected startups pre-COVID.
The next Y Combinator batch was Summer 2020 (S20), which kicked off in June and had its Demo Day in August this year. This was also YC’s first-ever 100% remote batch, a pivot the accelerator made due to the COVID-19 crisis.
In S20, while San Francisco still dominates, the curve continues to flatten:
In this batch, San Francisco represents just 30% of the batch, a marked decrease from the previous batch’s 42%. NYC continues to occupy the #2 position, followed by London at #3, and then San Jose & Mountain View, CA (which in fairness are also in Silicon Valley)
We’ll see how this data looks for the upcoming Winter 2021 (W21) batch, but I’d expect the curve to continue to flatten, especially given the net population exodus from San Francisco that started in March and seems to have accelerated over the summer.
While I still call the SF Bay Area home and appreciate all it has to offer, I consider it a net benefit to the world’s technology startup ecosystem that San Francisco is loosening its grip as the place to start a startup.
