Silicon Valley remains the epicenter of the innovation economy, but emerging cities around the nation continue to chip away at its dominance of the digital economy.
That trend is evident in new data from payment processing software giant Stripe, which tracks data on what it calls "breakout startups," defined as new companies with "unusually rapid revenue ramps."
In the three years preceding the start of the pandemic, Stripe's payment data showed 63% of new breakout startups were located in the Bay Area. Since 2020, that figure has fallen to 46%.
Make no mistake, Silicon Valley remains the dominant force in the industry, but experts and the data suggest other regions are increasingly finding their footing in the innovation sector — a trend that has several implications for the future of the economy.
Behind Silicon Valley, the cities with the most breakout startups, according to Stripe's 2022 annual letter, are New York, Los Angeles, Miami and Austin. The letter specifically noted the growth of Miami, where breakout startups are up nearly 90% in 2021 and 2022 compared to 2016 and 2017.
In fact, there are more total breakout companies located outside of the top 20 startup hubs than there are in the Bay Area, Stripe said.
In a separate report published at the end of last year, Stripe provided more context around the growth of nontraditional startup hubs.
Today, there are more than 350 U.S. cities where businesses collectively process more than $100 million annually on Stripe. Over the past five years, the fastest-growing states for internet commerce have been Washington, West Virginia and Ohio, according to Stripe.
During the last half decade, payment volume on Stripe from companies based in Columbus, Ohio, grew 40 times over. In Richmond, Virginia, it grew 20 times over. Atlanta, Charlotte, Denver, Detroit and Des Moines, Iowa, all saw their volume quintuple over the past five years.
Despite the headwinds facing much of the tech industry, new startups are being born every day — and at a faster clip than even before the pandemic.
Stripe's data shows 155% more new companies started in 2022 compared to 2019, which is one aspect of the Covid-19 fueled boom in new businesses.
Many of those are outside of the Bay Area, as well.
That's no surprise to Steve Case, chairman and CEO of Revolution and author of "The Rise of the Rest," who previously told American Inno the pandemic marked a tipping point in the emergence of innovation ecosystems around the nation.
"We’re at an inflection point over the last decade since we started this," he said. "We have seen more interest in different communities in terms of what’s going on with startups. We’re seeing more people start companies. We’ve seen more investors, both locally and nationally, backing companies ... We’re starting to see more significant exits and people are starting to say, 'Huh, maybe these places really can launch some pretty interesting, pretty valuable companies.'"
