If D.C.-area startups seem to be raising more money these days, it’s because they are.
That’s according to a recent data from Revolution’s Rise of the Rest Seed Fund and PitchBook, which illustrates the shift in startup funding geographically away from the usual suspects (think: San Francisco, New York, Boston) to other “rising cities” over the past decade.
The “Beyond Silicon Valley” report focuses on seed funding rounds, or less than $500,000, and early-stage funding, which it defines as Series A or B. And the findings validate that the pandemic only sped up investor interest in companies beyond their own backyards.
Exhibit A: When 2021 ends, it will claim the record for the amount of venture capital dollars funneling to entrepreneurs. But the portion of that capital going to Bay Area startups will also fall below 30% for the first time in 10 years, according to the report. And those investors aren’t holding their money back; they’re just putting it elsewhere.
The study also finds the number of VC investors in cities across the country has increased, which bodes well for the startups already situated their markets.
The D.C. region saw $3.2 billion come to its startups in seed rounds that involved investors from the Bay Area from 2011 to 2021, making it the fourth-leading market for that funding, only behind Los Angeles, Seattle and Austin, Texas. And Washington companies raked in $3 billion in early-stage investment dollars in rounds with New York backers during the same period, behind Los Angeles and Philadelphia. Overall, the local ecosystem is among those seeing increasing interest in companies headquartered here.
The startup universe saw $269.7 million in early-stage VC investment in 2011 — and by 2018, that jumped to $1.2 billion, per the report. Greater Washington is now averaging nearly 200 financing rounds for its young ventures each year.
“Despite visiting more than 40 cities with Revolution’s Rise of the Rest, I am always wowed by the innovation in our own D.C. backyard,” Anna Mason, managing partner of the Rise of the Rest Seed Fund, said in a statement. Over the years, the fund has backed businesses ranging from District regulatory dashboard FiscalNote Inc., now poised to go public and, more recently, Arlington e-commerce startup Recurate Inc., which provides two-sided marketplaces for brands to resell their used items and closed a $3.25 million seed round in the spring.
“D.C. also reminds us of the critical role policy plays when trying to build transformational companies,” Mason said. “While navigating complex regulatory environments often creates challenges for founders, it also opens up a lot of opportunities. D.C. founders have a unique front row seat to the governing process and all that impacts scaling startups.”
Nationally, these dynamics mark “a tipping point” as “Silicon Valley’s lock on the innovation economy is finally breaking,” Revolution CEO and Chairman Steve Case said in a statement.
D.C.-based Revolution focuses on founders and their ventures outside of Silicon Valley. It also comprises Revolution Ventures and Revolution Growth, as well as Rise of the Rest — which invests in young companies across the U.S.
