Where can you invest the least cash and get the most impact? In venture capital, it depends a lot more on geography than you might think. Pitchbook recently did a report on which cities perform best as investment multipliers. They tracked only exits of at least 1x, so keep that in mind when you see the charts below. The metric, multiple on invested capital, or MOIC, is dead simple:
MOIC or Multiple on Invested Capital = exit value/total VC raised
Atlanta Among Top 10 Cities
DC, Atlanta, Raleigh, Philly and Boston created a power corridor in the East Coast. Chicago was the clear outperformer among central cities, ahead of Dallas and Austin.
The venture capital frontier is creating top capital efficiency
So those are averages, but when you break it down further into the scale of the exits, you really start to see some distance in the performance of these cities. Chicago is definitely a home run town, and had the most exits over 10x (and more under). Then, the baton heads East to Raleigh and New York. From these numbers, it’s pretty clear that as an investor, you might want to bet more regularly on venture firms on the venture frontier and the Eastern corridor. The number of exits is in entirely different leagues, of course, but my hometown heart was still cheered to see Atlanta edge out the Bay Area (barely) on returning money on capital invested–as did Austin, Philly, LA, NYC, Raleigh, and Chicago.
Number of exits separated by MOIC
Pitchbook notes the data will be skewed positively, as successful exits are more likely to be reported than smaller ones. Companies under 1x return are not included–so this data is really a ranking of “wins.”
Questions investors should be asking . . .
The trend in finding great venture capital returns has long been skewed toward scrappy and early stage–something we have in heaping helpings here in the Southeast. If you’re thinking about venture capital as an investment, this data might bring up some questions like:
- Is my portfolio exposed to the power corridor in the East?
- Am I overbalanced in a particular geography, or am I getting good regional exposure?
- Are my new investment opportunities well rooted in the venture frontier, where the trend is that invested capital is getting better multiples?