February 11, 2016
Written by Kyle Coffee
We can track the evolution of emerging tech hubs with a wide range of indicators. IPOs, acquisitions, unicorn valuations and funding rounds are just a few. And when you start to look at change over time instead of just totals, several cities outside of Silicon Valley start to look really impressive.
The National Venture Capital Association recently released its report on capital investment in metropolitan statistical areas in the U.S. for 2015, analyzing 133 markets in which at least one deal was made. The dramatic results? Well, Silicon Valley (specifically, the San Francisco metro area) is still king, with 797 companies receiving more than $21 billion in 2015. The New York, San Jose and Boston metro areas round out the top four, with almost $7 billion, $6.2 billion and $5.6 billion raised, respectively.
Of course, not all venture capital funnels into those four markets, and perhaps a more intriguing exercise would be to take a look at the cities that made huge leaps in total funding dollars compared to 2014. These markets haven’t had the steady and long-term investment success and growth of a San Francisco or a Boston, but the sudden uptick could mark the beginning of a trend that would soon make them major players among other established startup cities. Below are the three that experienced the highest growth in tech dollar investment between 2014 and 2015, per NVCA’s study.
2015 Investment: $301 million
Year-Over-Year Change: 1,916 percent
The Miami region made a lot of noise last year, as companies in the area raised $301 million. The number represents a 1,916 percent rise from 2014, which saw $14.9 million in total investment. The buzz goes beyond raw numbers though and extends into hype around the digital health sector; Miami is now firmly entrenched in the digital health hub conversation along with mainstays Boston and New York.
78 percent of South Florida venture deals went to health tech startups, led by such companies as Miami-based CareCloud (raised $16.9 in 2015) and Fort Lauderdale-based MDLIVE ($50 million). Startupbootcamp, a European-based accelerator looking to capitalize on the healthcare innovation in Miami, established a program to provide hundreds of mentors and VCs to help top Miami health startups progress even more quickly.
And the Miami tech startup innovation isn’t completely exclusive to healthcare. In December, Forbes reported that Magic Leap, a secretive augmented reality startup that’s developing technology along the lines of Facebook’s Oculus, was in the midst of an $827 million Series C round. The company had already raised $542 million in a 2014 round led by Google, despite the fact that it still has yet to release a product.
2015 Investment: $63 million
Year-Over-Year Change: 3,269 percent
With a staggering 3,269 percent jump in investment money, Boise had the biggest surge in VC funding in 2015. However, unlike Miami’s healthcare sector rise, the success of Boise hinged on fewer deals of higher dollar amounts. In particular, network solutions company CradlePoint hit it big with a $48 million Series B funding in April. CradlePoint focused on using the funds to acquire, which it did later by buying software-defined networking company Pertino.
Then in December, fraud detection organization Kount hit it big with an $80 million announcement (this investment was from private equity, rather than VC funds). Kount protects users from online and mobile payment fraud, and its emergence asserts the company’s place in a cyber security field traditionally crowded with Boston and DC-Virginia pillars.
CVC Capital Partners Managing Partner John Clark assessed Boise’s evolution, explaining that the investment aligns with company strategy of “partnering with uniquely positioned technology companies in large, growing markets.” With these investments and the continued presence of Boise anchor Micron Technology, it’s worth keeping your eyes trained on Idaho’s most populous city.
2015 Investment: $256.2 million
Year-Over-Year Change: 1,340 percent
Charlotteans Steph Curry and Cam Newton may be getting all the headlines, but the city has a whole lot going for it in tech as well. And like Boise, Charlotte posted high funding numbers as a result of a small set of companies receiving large investments. AvidXchange announced a $225 million Series E funding round, a deal that was listed by NVCA as one of thetop 20 largest of the year.
AvidXchange contributed to a final tally of $256 million investment dollars in Charlotte, a 1,340 percent increase over 2014 funding levels. And there’s also a developing health tech startup market in Charlotte, with healthcare payment transaction solutions provider inMediata and data analysis platform Arrowlytics raising $12.8 million and $3 million, respectively.
Contrasting the sprawling healthcare tech ecosystem of Miami with the successes of fewer individual companies driving investment dollars in Boise and Charlotte, we can see that there’s not a prescribed, singular method for cities to start down the path to startup hotbed. Exceeding 1,000 percent year-over-year in investment growth is a rare achievement that even Silicon Valley can’t lay claim to. Sure, it’s easier to grow exponentially when starting from a smaller baseline, but no one’s predicting these emerging startup markets are going anywhere soon.
We’ll just have to continue to monitor the newly competitive markets and their companies to find out just how high the ceilings really are.