Austin rules ‘Mighty Middle’ of US when it comes to seed funding
Source: Austin Business Journal
In the space between the coasts, Austin is the king of seed capital, a new report shows.
In the central part of the United States, Austin took the No. 1 spot among metros based on seed investments between 2010 and 2019, according to a study by Crunchbase and Dundee Capital titled “America’s Mighty Middle.”
Austin beat all contenders with $1.3 billion in seed funding. Greater Denver was No. 2 with $1.2 billion while greater Chicago was No. 3 at $1.1 billion. The Dallas area placed No. 4 with $700 million in seed backing during those years, the report said. Houston was No. 6. The report is based on cities and metros among the 25 states that stretch from the Rocky Mountains to the Appalachians.
“In the last decade, startup activity outside of Silicon Valley has surged,” the report said. “Coastal VCs are concentrating more capital outside of traditional startup hotbeds like the Bay Area, New York and Boston, while VC fund formation between the coasts proliferated over the last decade, allowing entrepreneurs to access capital regionally." Austin also compares favorably when considering total venture capital investment, according to the report. The Texas capital saw $11.8 billion raised over the past decade, trailing only the $15.2 billion raised in the Chicago metro. The only other metro that saw more than $10 billion raised during that timeframe was Denver, at $10.5 billion. The Dallas area posted $6.5 billion in total investment, putting it at No. 5 by that measure.
In the "Mighty Middle," invested dollars grew from $5.8 billion in 2010 to $20.2 billion in 2019, the report said. Also, investment across all stages increased significantly throughout the decade. Texas did well, coming in at No. 2 on the list for most total venture capital investments among states. It edged out and Michigan and Colorado. Pennsylvania came in at No. 1. Venture capital funding in Austin hit $767 million in the fourth quarter of 2019, a level not seen since the dot-com days, and area companies raised more than $2 billion total last year. In the first quarter of 2020, however, Austin startups raised $466 million across 54 deals, according to the Venture Monitor Report.
The second quarter is looking rough — businesses in Austin and beyond have struggled to meet expectations as the Covid-19 pandemic has rocked the country. That has meant a flurry of furloughs, layoffs and other belt-tightening measures at some prominent startups. Paul Thompson at Austin Business Journal contributed reporting.