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What role does Austin play in the current Venture Capital ecosystem?

(ENTREPRENEUR NEWS) A recent study ranked the top 12 metropolitan cities in the country – where does Austin land?

Finding funding pardners

As much as we love the vibrant startup environment of our home base here in Austin, it’s always good to know where we can improve.


Top 12 VC cities

Pitchbook recently released a study showcasing the ecosystem of the US venture capital market for the top 12 metropolitan cities in the country. The report looks at several key features of these economies, including total VC funds raised and invested; total number of VC rounds; and total exit values of companies who received VC funding and later solid their companies.

By compiling the weighted rankings of these cities in each category, the study arrived at an overall “ecosystem size” ranking for each city.

How ATX ranks

How did Austin do? We came in 10th. Probably not the showing we’d like to make. So how did we end up near the bottom of the list? And what can we take away from the individual data breakdowns?

For starters, while the number of deals closed has remained stagnant, those deals are more valuable than years prior. First-stage financing drives most of the VC economy growth in this sector.

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According to the report, Austin had the most number of venture capital investments in first financing ever in 2015 at $324 million.

However, this number still represents a plateau for the city’s trend, and analysts predict a downturn by the end of 2016. Late-stage financing continues to trend downward as it has for the last few years. One way or another, our ecosystem will need some fresh investing in either category to see continued growth in our fields

Strengths and weaknesses

When we look at where VCs spend their money, we see that Austin’s startup ecosystem has some breadth to it. Media companies account for somewhere between 30 and 40 percent of VC activity, but the rest is a mix of several different industries. This puts Austin in a strong position for stable long-term growth in the investing sector thanks to its diversity.

The Achilles heel here comes from that media sector.

Austin has attracted quite a bit of outside investing attention. The number of investors funneling money into our startups from other metro area soared from 2013 to 2014. While that growth has leveled off a bit, it still accounts for a notable chunk of the VC money in our funding economy. The number of investors operating within the city is small by comparison, but it does continue to grow.

As far as exits, we see a similarly rosy picture. While the number of exits decreased from 2014 to 2015, the value of those exits shot up from $254 million to $350 million. Most of these companies got acquired, while a smaller handful got bought out and an even smaller handful went on to an IPO.


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Written By

Born in Boston and raised in California, Connor arrived in Texas for college and was (lovingly) ensnared by southern hospitality and copious helpings of queso. As an SEO professional, he lives and breathes online marketing and its impact on businesses. His loves include disc-related sports, a pint of a top-notch craft beer, historical non-fiction novels, and Austin's live music scene.

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