Trends From Analyzing Every Pre-Seed & Seed Round Since 2010

Part II

65,475 pre-seed and seed funding rounds have been announced in the US since 2010.

This data, enriched with unicorn, exit, and fund formation data, reveal how much things have changed over the past decade. Last week, we showed how pre-seed has emerged as its own asset class and that capital deployment is accelerating outside the traditional hubs.

Many followed up and asked for more detail on “Everywhere Else”. Which geographies are emerging and experiencing the most growth? And with such an exuberance of capital outside the traditional hubs, what is happening to price & round size in “Everywhere Else”?

We’re glad that you asked.

Trend 2

Regional Growth and Seed Round Inflation

To further understand which geographies were driving the growth in seed-stage startups (both pre-seed and seed), we analyzed the geographical growth across the following regions: Atlantic, Bay Area, Midwest, Mountain West, South, Southeast, Southwest, Pacific Northwest, Northeast, and New York City. 

Each region experienced respectable growth, but some stood out more than others. Choosing the 3 regions that grew the most and the 3 regions that grew the least results in the following:

Warm weather climates - the Southeast and Southwest - have driven the lion’s share of growth across seed. In 2021, when each region peaked, the two combined for slightly over 2,000 rounds, up from 260 in 2010. New York City also surged from 171 in 2010 to over 1,200 when NYC peaked in 2021.

Although the Midwest, Atlantic, and others didn’t crack the top 3 on the chart, each posted at least a 4x increase in growth since 2010. Collectively across the regions outside the bottom 3, growth has ramped from 830 investments in 2010 to over 5,500, nearly a 7x increase.

In contrast to the geographies that outperformed over the past decade, those that didn’t exhibit as impressive growth include the Northeast, Mountain West, and the Bay Area, which comes in last on our list.

Although the Bay Area is still the preeminent tech hub, the plateaued growth is hard to ignore. Taking a myopic look at the data and analyzing growth from 2014 onwards, we see that it is the only region that hasn’t doubled.

Startups are being founded and funded across every geography, and the gradient behind the trend is seemingly increasing. This is true both quantitatively, as it can be seen in the numbers, but also qualitatively, as D.C. leads all geographies in software developer openings (largely thanks to Amazon).

What about price and round size, though?

Prior to diving into the numbers, a GIF showing the median seed price since 2010 sums it up nicely:

In short, prices and round sizes have increased across every region, but they have become the highest in areas that, for the most part, have experienced the least growth in the supply of startups. 

This makes sense as it's Econ 101: Price increases when demand increases for a relatively fixated quantity of supply.

Nnamdi Iregbulem, a friend from Lightspeed, wrote about how the absence of equilibrium has driven up the price of startups across not just seed but all stages. 

We find just how large these rounds have gotten by diving deeper into the numbers.

Visualizing the data:

Across regions….

Across the top quartile of rounds…

Across the bottom quartile of rounds…

A closer look at Bay Area Seed rounds across quartiles…

Round size (and price) has increased substantially in every region. A few interesting callouts from the charts above:

• Round size has increased, but the divergence between quartiles is a recent trend. This is due to a multitude of factors and could be its own article. I’m happy to share thoughts if you are interested in the comments below.

• The growth of the bottom quartile is the largest increase from a multiples perspective. The bottom quartile of seed round sizes in the Bay Area has grown by a factor of 10, the largest multiple across any of the charts.

• The top quartile of seed rounds is as large as many Series As. The Bay Area stands at $14M, with NYC closely behind at $12M.

• Although the Bay Area and NYC are the most expensive, round sizes have dramatically increased everywhere. The mean and median round size for areas outside NYC and the Bay Area is $3.6M and $2M, respectively. This figure resembled prices in the Bay Area just 4 years ago.

Wrapping up

Growth in startups has been dramatic across all regions, especially outside of the Bay Area. As we will show in our next post, with prices/rounds inflating, investors are starting to look in regions such as the Southeast, Midwest for better value and the increased output of minted unicorns across those regions.