New York is a fantastic place. There are many good reasons it became America’s financial capital.
It’s human nature to assume that the future will be much like the past. But if you believe software eats money, you know that financial services is about to go through a transformational change.
What will tomorrow’s financial services landscape look like? It’s comfortable to believe that New York will dominate finance tomorrow, just as it dominates finance today. But is this true?
Let’s look at some data.
If you look at US financial services companies who raised money from Top VCs any time in the last 3 years, here’s what you find:
- Bay Area: 93 companies with total invested capital of over $12.9B (61.0%)
- NYC: 36 companies with total invested capital of over $3.6B (17.1%)
- Los Angeles: 7 companies with total invested capital of over $2.6B (12.4%)
- Everywhere else: 25 companies with a total invested capital of $2.0B (9.5%)
The Bay Area produced almost three times as many finance startups as NYC, and these companies raised almost four times as much money.
Utah and Massachusetts produced four and five finance startups respectively, but every other region produced at most one or two. California as a whole accounted for 62% of companies and 72% of all funding.
Of the 20 companies that raised the most money, 13 are based in the Bay Area and only 4 are based in New York.
It’s always difficult to predict the future—and you might reasonably ask whether this data is a good signal to draw any conclusions from.
Here are a few reasons this data should give you pause:
- The Top VCs we use as a filter in our basket are the world’s best software and technology company creators and have funded almost every technology company of any significance for the last 40 years, including Apple, Amazon, Google, Facebook and Netflix.
- Apple, Amazon, Google, Facebook and Netflix are the respective winners in their markets and, as software companies, have reshaped the industry they participate in (i.e. software eats the world).
- Apple, Google, Facebook and Netflix are all based in the Bay Area and have brought together, trained, and made wealthy tens of thousands of talented software professionals.
Will San Francisco replace New York as financial capital? Will financial services revenues shift to the Bay Area the same way advertising revenues did?
Only time will tell.
But there is no question that the Bay Area will be a critical player in the future of financial services, if not the dominant one.
Data Source: Crunchbase
Photo by Tyler Casey