There is no other Silicon Valley in sight. According to the new “Tech Scaleup Silicon Valley” Report by Mind the Bridge and Crunchbase presented today at the Opening of the Scaleup Summit in San Francisco, Silicon Valley remains the epicenter of innovation.
This small area of the world hosts in fact 7,894 scaleups able to raise over $501.3B (67% of the Bay’s GDP) in funding. The scaleup population represents a quarter of the whole of the US (30.007), very close to the whole of Europe (9,256) and almost 5 times more than Israel (1.635). On the other hand, the total funding is equal to half of the total capital made available to US scaleups ($1,010.9B), about 2.6 times more than the amount raised by their European counterparts ($195.5B) and 1.1 times higher than China ($468B). The main driving force is represented by Venture Capital (84.8%) followed by a breeding ground for IPOs (14.9%) but low interest for ICO (0.3%), also due to regulation constraints.
Furthermore, the Report tracks 748 Scalers in the area, plus 59 Super Scalers (companies that raised more than $1B since inception). Only China can match such figures with 664 scalers and 54 super scalers. Finally, according to previous MTB studies, 319 of the Fortune 500/Forbes 2000 companies have a stable innovation presence in Silicon Valley, some of them with more than a single outpost. While it is undoubtful that the COVID-19 epidemic has had some effects on the medium term commitment of such companies, data shows that both the number and the size of such units are experiencing steady growth.
“Despite the fact that more and more tech startups are leaving California and likely more than 30 clusters in different places are able to get beyond critical mass, no ecosystem realistically has the possibility to close the gap with the Bay Area and reach its density levels – commented Alberto Onetti and Marco Marinucci, Chairman and CEO of Mind the Bridge, respectively – Although alternative centers of innovation have emerged, our data confirms that the Bay’s dominance still looks formidable. Investments in Silicon Valley scaleups are 4.9 times higher than in New York, about 7 times more than in LA, 10+ times more than Boston/Cambridge and Austin, and 30+ times more than the other hubs.”
Silicon Valley finds its place in the top-right quadrant of the “Scaleup Matrix” deployed by Mind the Bridge to best measure the innovation economy compared to the size of the overall economy: it means this area overperforms the US average both for the “Scaleup Investing Ratio” (67.02% of capital invested in scaleups compared to the GDP) and the “Scaleup Density Ratio” (161 scaleups for every 100K inhabitants – this indicator in Israel is equal to “only” 18.4, 9 times lower).
In terms of growth pattern, the Report highlights the well-known “waves of innovation” that characterize this area:
- The number of new scaleups in Silicon Valley constantly increased by about 20% a year between 2011 and 2014, stabilized at around 750 new scaleups on average per year between 2014 and 2017 and then decreased by about 10% each year. In the first semester of 2021 the study tracks 324 new scaleups with an estimate for the year of about 700 new companies.
- On the other hand, in terms of funding, local scaleups raised around $19B on average per year between 2011 and 2013, then $35B per year from 2013 to 2017 and $69B from 2018 to 2020. Finally, in 2020 they attracted $5.8B more than the previous year (a 8.7% increase), a striking figure compared to a general contraction of the US economy in 2020 of about 3.5% of GDP. Consistently, during the initial 6 month period of 2021, Silicon Valley has already recorded about the same amount of funding ($69.2B) as the previous three (record) years.
“This may suggest two things: first, that in Silicon Valley funding activity was directed to a smaller number of scaleups with high-growth potential, which required more substantial capital to fuel their growth”, added Gené Teare, Senior Data Journalist of Crunchbase – – Secondly, that the Covid-19 pandemic appears to have had a limited impact on funding activity in Silicon Valley, despite the inevitable shift towards a ‘new normal’ in tech work environments, as a consequence of travel restrictions and social distancing measures.”
Silicon Valley seems no exception to this: several local tech giants are currently considering more flexible work arrangements, others are downsizing, or taking advantage of tax incentives to relocate, at least partially, to other ecosystems. Nevertheless, data indicate that Silicon Valley is here to stay and rumors of the supposed “end of Silicon Valley” appear to be relatively exaggerated.