New York City, Silicon Valley, and the Boston area are where 75% of venture capital funding goes, but as a new generation of internet companies gestates, and as the COVID-19 pandemic reshapes America’s working landscape, that’s poised to change.
Two people looking to redirect that money migration pattern—America Online cofounder and chairman and CEO of Revolution Steve Case and Senator Amy Klobuchar of Minnesota, who helped introduce the New Business Preservation Act to provide funding for innovative companies and startups—talked about the situation this afternoon at the Fast Company Innovation Festival.
“We’re figuring out how to slow that brain drain and indeed create a boomerang of people returning,” Case said during a festival session titled “United States of Innovation,” citing the trend of young people moving to the coasts to get jobs. “Some actually have returned because of the pandemic. Maybe some of them will stay. That will foster more startup communities.”
Those three aforementioned hotspots were not always the centers of funding and innovation for tech companies. AOL was in the Washington, D.C.-area, while Dell was headquartered in Austin, and Microsoft near Seattle. Sprint called Kansas City home, and CompuServe was in Columbus. IBM’s PC operations were in Boca Raton.
But as the first wave of companies that built the internet gave way to the second wave—think software—the three regions solidified as power bases. Case believes the next tech frontier offers opportunities to switch things up.
“In this third wave, when the internet meets everyday life, there’s an opportunity for these cities to rise again,” said Case.
Klobuchar pointed out that 60% of the investment went to those two East Coast and one West Coast destinations in 2008 versus the three-quarters of that funding now
“If we don’t start spreading out the goods here . . . we’re going to lose talent,” she said. “There’s talent all over the place.”
To ensure that startups have the motivation and employee pool they need, local infrastructure needs to be in place. That includes things like transportation, education, and broadband. Political support, meanwhile, can help with issues such as immigration for would-be workers.
Case pointed out that 75% of Fortune 500 companies aren’t on the coasts, and that it’s primarily not those businesses that are creating new jobs, but rather young companies.
“Housing costs in [tech hubs] are very high,” Klobuchar added. “It’s easier for young entrepreneurs who aren’t going to be making so much money to be in places where you’ve got less expensive housing and less expensive childcare, all kinds of things.”