Silicon Valley. New York. Boston. Startups in these locales always claim the largest share of venture capital funds because of their proximity to the biggest and best-funded VC firms. Competition for deals is fierce, making it expensive to fish these markets for new investment opportunities or tuck-in acquisitions.
What to do? Try up and coming markets instead. As the infographic below shows, Northern Virginia, Denver and Boulder (Colorado), and Salt Lake City are among the locales that are attracting an abundance of VC funding. According to AngelList, there are over 11,000 startups in these areas that are seeking and finding funding right now.
Five States, Five Ideas
So while Silicon Valley is already littered with unicorn companies, it's these regions — and others like them — that are feeding the foal companies that could one day grow to be unicorns. Here are five with existing corporate backing that you may want to keep an eye on.
Based in Denver and founded in 2012, Rachio makes a WiFi-controlled sprinkler automation system that replaces the thermostat-like contraptions found in the garage of most homes and then taps into the local WiFi network to connect with a smartphone and an accompanying iOS or Android app. So far, co-founders Chris Klein, Matt Reisman, Franz Garsombke have raised $10.5 million from 20 outside investors, including Amazon's corporate venturing team.
Chicago-based YCharts, which calls its financial charting software the "financial terminal of the Web," has been engaging stock investors and institutional backers since its founding in 2009. The company last raised funds in 2015 in a $6 million C round led by Morningstar, an occasional corporate investor that happens to also be one of YCharts' Chicago neighbors. Morningstar also led the company's Series B financing round in 2011.
Michigan: Duo Security
Located in Ann Arbor, near the backyard of the University of Michigan, Duo Security started working on its suite of cloud-based data security products in 2010. Since, the company has raised $49 million over four rounds of venture financing. GV is Duo's lone corporate investor, but it's also participated in three of its funding rounds and led one—a Series B round from 2014 that added $12 million to the company's coffers.
Northern Virginia: Zoomdata
Based in Reston and founded in 2012, Zoomdata claims to have the fastest platform for rendering visual analytics from Big Data and backs it with references to Cisco and the Library of Congress as customers. Investors have responded by pouring $47.5 million into the company over five fundraising rounds. Nearly two dozen investors have contributed to that total, including two corporates: Comcast Ventures and In-Q-Tel, the investing arm of the U.S. Central Intelligence Agency.
Utah: Lucid Software
This maker of cloud-accessible charting and other visual communications tools started in 2009 and has since been recognized as one of Utah's best places to work. Venture investors appear to take comfort in Lucid Software's ability to attract and retain top talent. They've committed an estimated $42.1 million in capital to the company over three rounds of financing, and that includes GV, which participated in Lucid Software's $1 million seed round from July 2011.
None of these companies rate the unicorn valuations that have become far too common in Silicon Valley and other traditional venture hubs. Yet, as businesses, all five have turned enough heads to raise multiple rounds of funding and keep growing — just as you'd expect of any successful startup.
Backing is what makes them unusual. Or so you'd think to look at the latest data from PwC and its MoneyTree Report on venture capital investment. Companies in Silicon Valley, New York and Boston get the lion's share of capital every quarter, PwC says. So, naturally, inexperienced corporates mistakenly fish for deals in established markets, while ignoring startups in other areas of the country and the world.
You know who isn't passing over these territories? Intel, granddaddy of the corporate venture capital industry. Of its last 10 investments through mid-January, only three (Cloudian, Embodied, StealthMine) were located in California. Two of the remaining seven were in Virginia (Perrone Robotics) and Michigan (CubeWorks), two were located in Europe (iZettle, SIGFOX), while one each were located in China (Eazytec), Miami (CareCloud), and Seattle (Mighty AI).