Boston Metro VC Funding Increases 47.6% in 2020 — Biggest Jump of Any US Metro

Metro Boston attracted $16.9B in capital funding in 2020 according to PitchBook’s 2020 Venture Monitor, marking another big year for Boston-based startups in raising capital. That marks a 47.6% increase in Total Deal Value from 2019, the largest YOY jump of any Metro studied in the report.

This further solidifies Boston as one of the top cities attracting investor capital in the US, trailing New York by only $2.4B in total funding. Boston, NYC, and San Francisco account for roughly 68% of all US VC funding in the US, although some smaller markets are starting to emerge as bigger players. Silicon Valley’s total share of funding dropped below 20% for the first time, signaling that many tech companies are thinking outside of the box in terms of where they can open shop.

This trend has been slowly building over the past few years and was accelerated in 2020 due to the pandemic. Expansion of remote work, high costs of operating, and risks associated with living in densely populated cities made many startups reconsider where to launch their companies.

Smaller metros provide workers more freedom and lower cost of living, so they are an attractive option for budding startups. As a result, cities like Nashville, Miami, Seattle, and Chicago all saw big increases in VC Funding in 2020 compared to previous years.

While Boston’s cost of living is just as expensive as the other 2 tech hubs of New York and San Francisco, experts argue that the housing shortage and subsequent high prices in Greater Boston is due in some part to all of the VC funding that has flowed to the area over the past decade.

Why is Boston so attractive for VC funding? The city’s world class educational institutions offer startups a perennial garden of talent that’s ripe for the picking, making Beantown a favorite for Venture Capitalists.

This has been the driving force that has transformed Boston from the hard-working blue collar city it once was to one of the tech hubs of the West, and it’s likely a big reason why the median price of single family homes for sale in Boston rose 7.5% in 2020 despite record high unemployment and a pandemic on our hands. It could also explain why rent prices have remained relatively flat compared to the supply glut of available Boston apartments in some neighborhoods.