equity, venture-capitalI was once told that for the same dollar in one metro area that you on average would raise two in the Bay Area. Clearly, venture capital dumps more cash into Bay Area than any other metro area, but what’s not clear is if these numbers are meaningful. Here’s an example of what I mean, I was once told that the cost of equity per dollar per top metro area globally was double in the Bay Area. What was meant by this claim was that if you went on a VC road show presenting the same equity deal terms with the same valution, that you per dollar of equity that you’d get double the amount in cash in the Bay Area. Is there any way to confirm this is the case, either via access to raw data, an existing public report, or otherwise?
(Note that this clearly would vary based on the startup’s match to existing VC - but the question is about on average, not in the case of a given startup.)
I probably won’t be able so answer your question completely, but I can somewhat confirm your hypothesis based on a friend’s experience. A friend of mine was developing a fitness application for Google Glass and was based in London, UK. The startup raised funds locally in a seed round at XX valuation. For their Series A round they first looked locally again, but on a trip to the Bay Area they also talked to investors who were talking significantly bigger numbers for the same equity (they were eventually unsuccessful in raising funds in the US mainly because of bad Glass publicity at the time). Whether the number is double, triple, or something else is hard to say. However, I believe that the supply and demand equilibrium in the Bay Area creates quite intensive competition between VCs, automatically pushing the price upwards. Not a lot of data to back up my answer, but just an anecdote that slightly agrees with your hypothesis.
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