Investigating sector-based activity by geography
In our last post, we looked at the breakdown of different startup business sectors by geography. Next, we will examine the same relationship in reverse, looking at how geography breaks down by business sector. Our goal in this investigation is to offer easily digestible insight into where different sectors’ strengths lie.
We face the same challenges here that we did with our geography-focused examination in that many business sectors have a small number of companies within them. Looking at the data below, it stands to reason that this is due to certain industry sectors being better growth areas than others over the last two decades (Fig. 1):
It should be unsurprising that sectors such as Internet, Mobile & Telecommunications, Software, and Computer Hardware & Services would represent the major growth areas of the last twenty years. Given that samples in sectors outside of our top five are so limited, and that there exists such a steep drop-off between those top five sectors and the rest of our data, we elected to make that top five the focus of our analysis.
Looking at those companies identified as Internet entities by CB Insights, we see that Silicon Valley is preponderant, as noted in our previous post (Fig. 2):
Beyond Silicon Valley, we see that New York plays an outsized role in the Internet sector relative to its non-Silicon Valley peers. Outside of New York, we generally see that the sector is strong across most geographies. Boston stands out for its lack of Internet companies relative to the New York Tri-state, given the two cities feature a roughly approximate number of companies in the sample.
Moving on to our second-ranked sector, Healthcare, Silicon Valley is once again in the lead (Fig. 3):
Outside of Silicon Valley, it is unsurprising to see Boston ranked a close second behind Silicon Valley, given the city’s reputation as a center for healthcare innovation and entrepreneurship. What is surprising, however, is to see San Diego — our eighth-ranked region, and one with significantly less activity than top-tier regions like Silicon Valley, New York, and Boston — with such a strong showing in the Healthcare sector. Indeed, San Diego’s presence on our list is due almost entirely to healthcare companies, with twelve of its fourteen companies belonging to the sector.
Looking next at companies in the Mobile & Telecommunications sector, we see that Silicon Valley so dominates this sector that it is difficult to draw any meaningful conclusions about activity outside of the region (Fig. 4):
We see something similar with companies in CB Insights’ Software sector (Fig. 5):
As with Mobile & Telecommunications firms, it is difficult to draw any conclusions about markets outside of Silicon Valley, as no particular geographies stand out and performance largely tracks with market size.
Moving on to our final sector, Computer Hardware, Boston does stand out as having a higher concentration of these companies than other geographies (Fig. 6):
Beyond Boston, however, no geographies stand out as being strong in the Computer Hardware sector.
Ultimately, our ability to assess larger geographic patterns in our data is limited by geographic distribution and sample size. But there is useful information in this: across all sectors, Silicon Valley is home to most companies fitting our selection criteria of being valued at $500 million or more and having been founded since 1998. Beyond Silicon Valley, some of our preconceptions about different geographies’ respective strengths tend to track closely with the data. Perhaps more importantly, most activity is spread across different geographies, respective of their size.
While the general lack of clear relationships between industry sectors and geographies makes it difficult for us to target specific areas for engagement in order to chase a certain industry, it also tells us that interested parties — venture capital firms, entrepreneurs, or public sector economic development entities — should not feel like they are limited by geography in pursuing opportunities in a given industry. Success can happen anywhere, and the data supports it.
