June 27, 2018
Pitchbook has released a new study on startup ecosystems and a few things immediately stand out to me:1) TX has anemic local capital per venture backed startup. It's WAY behind states with growing ecosystems like Tennessee, Utah, Michigan, Missouri, and Colorado.Some might argue the number is artificially low due to the angel ecosystem filling the gap, but outside of Colorado and Utah the states mentioned above have very minimal VC activity. Additionally, the number of startups receiving funding hasn't proven this to be true, bringing me to my second observation.2) TX seed start-up density (# of startups receiving seed funding / pop.) is low. TX's number is around 15 - several states are ~20+. This makes sense given the above - seed rounds are often led by local investors, and if there isn't enough capital then fewer ideas are funded. However, Texas does beat IL which is a surprise given Chicago's recent success.3) Unsurprisingly, the density gap between established ecosystems like CA, MA and NY really grows in early-stage and late-stage funding. However, the gap is MUCH wider than I expected. In some cases, TX trails states with more active startup ecosystems by 5X.All of these things are evident on the ground and it's good to see data backing up the assumption more capital is needed in TX. The report highlights the need for startups to seek angel / seed funding that really understands the fundraising process and has a network to connect them to follow on capital.You can find the study here.