The New York Times recently carried an article “Tech Start-Ups Find a Home on the Prairie.” In this article, the Times commented on the Halo Report sponsored by Silicon Valley Bank, the Angel Resource Institute and CNB Insights, in which data from angel investments suggested that in the last year the share of startup companies has moved to the Great Plains region, ostensibly to the detriment of Silicon Valley.
Indeed, the underlying research reports showed that California’s share of angel investing deals declined from 2011 to 2012, a finding consistent with my own research that California’s share of startups has not only decreased between 2011 and 2012, but has been in a decade-long decline. The Halo Report shows a decrease of California’s share of deals from 21% to 15.9% over the last year, while my data shows a much more modest decrease of 18.9% to 17.4%. When I subset down to deals less than $1 million (closer to typical angel investment sizes) my results are slightly closer to those of the Halo Report, with a change from 19.9% to 17.4%. Overall, the relatively close correspondence is confirmation of my finding that startup activity is beginning to shift away from California towards other states.
Where is that activity going? My data here diverge somewhat from that in the Halo Report, but are generally consistent. The thrust of the New York Times article is that angel investing activity is increasing in the “Silicon Prairie,” defined as the “Great Plains” region in the Angel Resource Institute reports. Using the same states as in those reports, my data show only a small increase in startup activity in the Great Plains region, with its share increasing from 5.07% to 5.11% from 2011 to the first half of 2012. But when I subset down to deals less than $1 million, my results grow closer to those from the Halo Report, with an increase in share in the Great Plains from 4.93% to 5.30%.
The Halo Report taken together with my own research is further evidence that startup businesses are abandoning California. Although some increase is occurring in the “Silicon Prairie,” my own data suggests that startups are increasingly popping up anywhere but California. This is the phenomenon I have described as the developing “California Rustbelt” economy.