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Saturday, June 19, 2021 | 03:50 am
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What the Tech Ecosystems of Tomorrow Might Look Like

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What the Tech Ecosystems of Tomorrow Might Look Like

Like most industries, the U.S. technology ecosystem has gone through significant changes over the past year as remote work has become the norm for so many companies. In the tech world, however, significant portions of the workforce were already partially or even fully remote well before 2020; the pandemic has simply accelerated this shift.

Now, as remote work continues, tech companies of all sizes are increasingly less interested in where their software development teams physically live and more interested in what opportunities a remote environment may bring to draw from a broader talent pool. We expect this will fuel continued change in where technology ecosystems are clustered and dispersed across the United States.

Over the last several years, approximately 75 percent of U.S. venture capital has been invested in four primary markets: San Francisco, Los Angeles, New York, and Boston, according to PitchBook data. Because many technology companies burn through cash and require funding to sustain their operations while they scale their offerings, we expect U.S. companies will generally continue to experience the most success in these main hubs.

However, data from Silicon Valley Bank’s State of the Markets 2021 Q1 report reveals a shift that happened last year toward more startup activity in non-core metro areas, outside of traditional innovation hubs.

“Especially in the Bay Area and Boston, you see a significant number of companies being started in the ’burbs relative to the city centers,” Silicon Valley Bank senior market manager Dan Allred said during RSM’s February Tech Connection event, which brought together a panel of industry leaders to discuss the SVB report.

In 2020, 25 percent of Bay Area startups were headquartered in San Francisco, and 10 percent were headquartered in Palo Alto — a decrease for both cities compared to 2019, according to SVB’s report, which used data on the share of the bank’s clients onboarded to its startup banking group by city. Sixty-five percent of startups were headquartered in parts of the Bay Area outside of those two cities last year — up from 55 percent in 2019. The share of Boston-area startups headquartered in non-core metro areas also saw an increase in 2020 to 72 percent, compared to 58 percent in 2019. In the city of Boston itself, the number dropped from 22 percent in 2019 to 18 percent last year, according to SVB.

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