PitchBook Releases New Framework to Uncover Key Drivers Behind Venture Capital Ecosystem Development

SEATTLE, and NEW YORK, and SAN FRANCISCO, and LONDON, June 26, 2018 /PRNewswire/ -- PitchBook, the premier data provider for the private and public equity markets, today released a US VC Ecosystems report, which introduces a framework for evaluating the health and growth potential of venture ecosystems across the United States. The report examines key indicators of ecosystem development including density, resources and talent. According to the findings, most US states have high density of very early-stage startups but lack late-stage startup density. While states with low late-stage density also have fewer exits, healthy early- and very early-stage vitals could indicate potential for growth. States with ample access to local venture capital, however, also have high costs of living and labor. This finding suggests that proximity to funders comes at a higher cost of operations. Additionally, states with top-tier colleges and universities also appear to better retain talent, which contributes to long-term growth of their venture ecosystems.

To download the full report, click here.

"To help answer the long-debated question as to what drives development of venture ecosystems in the US, we conducted an extensive evaluation of what we believe to be key indicators of development," said Joelle Sostheim, analyst at PitchBook. "We find that development is a factor of a robust supply of startups at different phases of maturity, availability of funding and relative cost of doing business, and homegrown talent retention. We'll continue to leverage this framework as a litmus test for evaluating bourgeoning venture ecosystems across the country."

To better understand the underlying factors that may impact ecosystem development and subsequently, returns, PitchBook analysts identified ecosystems at varying stages of development and compared factors including density, resources and talent. This framework builds on existing analysis from the Ewing Marion Kauffman Foundation and is supplemented by PitchBook metrics, methodology and administrative data. Characteristics evaluated in this framework, include:

• Density – The number of businesses that have received venture funding by stage of funding, relative to state population.
• Resources – Local capital availability for venture-backed startups, participation of outside investors and the relative cost of doing business.
• Talent – Founder experience, local university pipeline, gender and diversity of founders. 

When applying this framework to US venture ecosystems, PitchBook uncovered there to be few well-developed late-stage venture ecosystems, yet a healthy population of smaller ecosystems with growth potential. Additionally, PitchBook found the amount of local capital per startup was highly correlated to the state's relative level of labor and housing costs. Last, founder experience is relatively even across the US but talent retention was found to be more variable. States with top-tier colleges and universities produced a higher proportion of homegrown startup founders.

Readers can access the full report and findings by clicking here.

About PitchBook
PitchBook is a financial data and software company that provides transparency into the capital markets to help professionals discover and execute opportunities with confidence and efficiency. PitchBook collects and analyzes detailed data on the entire venture capital, private equity and M&A landscape—including public and private companies, investors, funds, investments, exits and people. The company's data and analysis are available through the PitchBook Platform, industry news and in-depth reports. Founded in 2007, PitchBook has offices in Seattle, San Francisco, New York and London and serves nearly 16,000 professionals around the world. In 2016, Morningstar acquired PitchBook, which now operates as an independent subsidiary.

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SOURCE PitchBook

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