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Why nearly 300 cities now host more than 1,000 unicorns
TAKE AN EVENING walk on 17th Cross Road in Bengaluru’s HSR Layout district, and you bump into tech types stepping out of their startup’s office and into one of the local microbreweries. They might work for Udaan (e-commerce), Vedantu (education technology) or another of the growing herd of private startups valued at $1bn, whose proliferation in the area has prompted locals to dub it “unicorn street”. That name might be outdated, says Mohit Yadav, co-founder Bolt.Earth, a unicorn wannabe housed in the MyGate building. “Unicorn neighbourhood” would be more apt, he chuckles.
HSR Layout was not always the startup hub of Bengaluru, itself the startup capital of India. Five years ago Koramangala, a few kilometres to the north, was the place to be—until rising office prices pushed out new startups. The fact that young firms are beginning to eye an ever-wider region to set up shop hints that Bengaluru is maturing as a venue for ambitious technologists. The city is home to 26 unicorns, and last year attracted $13bn in venture capital (VC).
For decades Silicon Valley’s position as the birthplace of high-growth technology companies was unassailable. The small patch of land has given the world, among others, Hewlett-Packard (founded in Palo Alto in 1939), Intel (Mountain View, 1968), Apple (Los Altos, 1976), Google (Menlo Park, 1998) and Uber (San Francisco, 2009). Mark Zuckerberg moved in only four months after founding Facebook in Cambridge, Massachusetts, in 2004. As recently as 1999 the valley attracted a third of global VC investment. In 2011, 20 of the world’s 27 unicorns had their headquarters in America, according to CB Insights, a data provider. Only four other countries boasted even one.
Silicon Valley is still home to 136 unicorns, more than any other place in the world. But as Bengaluru shows, such clustering is no longer confined to a narrow strip of land in northern California (see chart 1). Unicorns can be found in 45 countries. Of the more than 1,000 that trot the globe, nearly half reside outside America. The share of all VC flowing into American startups has declined from 84% two decades ago to less than half (see map).
The diffusion of capital beyond Silicon Valley in part reflects huge growth in tech in recent years that lifted many boats. But it will endure beyond the ups and downs of the investment cycle. Even as tech valuations slid during the fourth quarter of 2021 and first quarter of 2022, the share of funds flowing to firms outside America has remained high at 51%.