In Catapult’s last monthly update to investors, we offered recent market data evidencing three important venture trends:
(1) a dramatic acceleration in the amount of capital being deployed into smaller ecosystems outside the ‘big three’ US tech hubs of Silicon Valley, NYC and Boston;
(2) a ten-year low in the percentage of all U.S. venture funding deployed going into Silicon Valley companies; and,
(3) a boom of newly formed venture funds that have a defined geographic focus.
In response to these trends, we ask the overriding question that these data points suggest: Is 2022 the year Emerging Markets-focused VC funds come of age? We believe the answer is yes. Here are reasons why:
1. The Pandemic-fueled Dispersion of Talent is Here to Stay
As capital for credible founders became more accessible in recent years, the battlefield shifted. The fiercest competition between startups today is over talent, not capital. Over the past decade, engineers and operators led a not-so-quiet exodus out of high-priced tech hubs and repotted themselves in smaller markets — the Nashvilles and Miamis of the world — where they could ostensibly enjoy big city salaries while living in low tax (or no tax) states and in housing markets 30–50% less expensive. Pandemic took hold in the spring of 2020 and only accelerated that exodus by an order of magnitude.
While some of that tech talent may indeed return to the high priced, established tech hubs from whence they came, the majority of these new transplants are expected to stay put, thus enriching the tech talent pool in these smaller hubs both now and for years to come.
2. ‘Centers of Excellence’ are manifesting in smaller geos now
Beyond seeding smaller hubs with a deeper bench of talent with which local startups can build teams and achieve scale, this talent dispersion creates another phenomenon that we, at Catapult, call Centers of Excellence. In…