By: Richard Florida
While it is true that venture-capital investment in the U.S. continues to rise, having reached more than $90 billion in 2017, such investment is growing even faster in other parts of the world, expanding by nearly 375 percent—more than twice the 160-percent increase here. China saw the largest jump, its share expanding from 4 percent of global venture investment in 2005 to a nearly a quarter of it by 2017. But it’s more than China. Nations including India, Singapore, Japan, the United Kingdom, Germany, France, Sweden, Israel, and Canada have all seen substantial increases in venture-capital investment in their startup companies.
When it comes to high-tech innovation and startups, the real action happens in tight clusters of activity within cities and urban centers. And here, the relative decline of the U.S. and the rise of the global rest is, if anything, even more palpable. The San Francisco Bay Area remains the world’s leading startup city, with roughly 20 percent of global VC investment. But a growing number of global cities are gaining ground, and quickly.
The pattern is clear: The rise of the rest is occurring, and it is mainly occurring in cities outside the United States. Across the world, innovators and entrepreneurs are increasingly realizing that they no longer have to come to Silicon Valley or elsewhere in the U.S. to launch their startup, and they are more often starting their new companies at home.
As Hathaway and I outlined in the Wall Street Journal this past weekend, part of the reason is that other nations and global cities have gotten wise to America’s long-term advantage and increased their investments in universities and R&D; made their cities denser and more attractive; and worked hard to retain their talent at home and opened their borders to global talent. The eroding advantage of the U.S. is partly self-inflicted, because it has clamped down on immigration and become far less open to foreign entrepreneurs and innovators.
The U.S. still accounts for roughly half of all venture-capital investment in high-tech startups. But if the trend continues as it has, it is more likely than ever that the next game-changing innovation will be launched not in Silicon Valley, Boston, Seattle, or New York, but in Shanghai, Bangalore, London, Berlin, or Tel Aviv.