Small businesses make their owners happier, their communities more livable, and their local economies stronger. But despite all these virtues, that's not what you want to build. You, audacious dreamer, are swinging for a home run. You want to build a world-changing, billionaire-making startup.

Where should you do it?

Your knee-jerk reaction is almost certainly Silicon Valley. And yes, the Bay Area is, without a doubt, the nation's most famous unicorn hatchery. But it's far from the only option, according to a thought-provoking recent ranking from PitchBook.

The VC deals database used its numbers to locate the top U.S. cities in terms of investor returns, a decent proxy for startups with big exits. In developing the ranking, PitchBook looked at cities which has more than 30 exits in the last 10 years and considered acquisitions or IPOs among companies that had raised at least $500,000 in VC funding.

Here then are the results, the top cities where startups returned the largest multiple of the cash investors put in (multiple in parenthesis):

  1. Washington, DC (11.04)
  2. Los Angeles (10.89)
  3. Bay Area (8.23)
  4. Chicago (8.17)
  5. Raleigh/Durham (8.13)
  6. Philadelphia (7.69)
  7. Boston (7.59)
  8. Atlanta (7.48)
  9. Seattle (7.04)
  10. New York (6.94)
  11. San Diego (6.73)
  12. Austin (3.97)

If you're interested in the nitty gritty details, this blog post from PitchBook lays out finer grained information about numbers of exits in which multiples.

Look beyond the Valley?

Of course, this list, like all such rankings, is hardly definitive on anything. As PitchBook itself admits, "there are many ways to cut the data that may give alternative results." So are there any broader takeaways to be gleaned from the ranking?

According to Imran Ahmad, a VC at OCA Ventures, the answer is yes. Writing for Forbes, he uses the PitchBook ranking as one piece of evidence to argue that while Silicon Valley may continue to wear the crown as most buzzed about startup hub, "hard data and anecdotal evidence shows not only that 'startup artists' can, and do, thrive anywhere, but that the advantages of operating far from the Bay area can help them flourish."

Why? Ahmad cites factors like lower burn rates (and therefore more time), proximity to customers, and more supportive local communities. Check out the post for his full argument. Or read more from other tech industry insiders who agree with him.

Do you agree that, these days, it just might just be easier to build a blockbuster startup outside of the Valley?

Published on: Jul 13, 2016