The valuation premium for startups in California and New York is real—and might be rising.
Spun through valuations data for 7,098 rounds raised by SaaS companies since 2019. Only included primary round data, so no confusing bridges or extensions. Focused in on Seed, Series A, and Series B.
When you split the medians into CA & NY vs Other States, the disparity is pretty stark.
The minimum premium for startup valuations in the two biggest venture markets was 21%, while in some stages and years the premium was as high as 70%.
And after being somewhat reduced in the down year of 2023, the CA/NY premium is back in full force so far in 2024.
𝗩𝗮𝗹𝘂𝗮𝘁𝗶𝗼𝗻 𝗽𝗿𝗲𝗺𝗶𝘂𝗺 𝗯𝘆 𝘀𝘁𝗮𝗴𝗲 𝗶𝗻 𝟮𝟬𝟮𝟰
Seed: 41% higher medians in CA/NY vs Other States
Series A: 59% higher medians
Series B: 38% higher medians
So - are companies in those two markets just better companies? What is happening?
𝗔𝗻 𝗶𝗻𝗰𝗼𝗺𝗽𝗹𝗲𝘁𝗲 𝗹𝗶𝘀𝘁 𝗼𝗳 𝗿𝗲𝗮𝘀𝗼𝗻𝘀
Startup ecosystems in CA and NY are more mature, meaning the competition for the best deals is higher, thus driving up valuations.
Valuations at the earliest part of the venture journey in CA/NY start at a premium (in pre-seed, etc), which drives up the price later on.
By Series B, many excellent startups founded elsewhere will have moved to the Bay or NYC, adding to the valuation advantage.
Investors in the most mature markets are less price-sensitive than VCs in other locations across the US.
I'm sure I'm missing a lot of other supporting points as to why the valuation gap has persisted. But there's no denying that a valuation premium is consistently stamped on to startups in the Bay and NYC.
Of course, taking a step back - valuations at Seed and A in particular have gotten much higher over the past 5 years regardless of location. A rising tide lifts all boats!
Appreciate those of you who reached out during my week off - back at the startup data game 🙏
#startups #founders #valuations #venturecapital
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