Venture Capitalists Stick Together
Half of all U.S. venture capital firms, and around half of U.S.-based companies, are located in just three areas: San Francisco/San Jose, Boston and New York, according to the National Bureau of Economic Research. Firms in these three areas outperform firms in other areas of the country, and they attract other venture firms, which are more likely to open offices in cities that already have venture firms -- the more, the better. In other words, VCs chase other VCs. "One of the most important determinants of the number of VC offices in a region is the success rate for all previous VC investments in that region,"according to the NBER. That said, the performance of firms in these hot areas depends not so much on their local investments, but on their investments that are farther away.
