U.S. losing to China in venture capital

The U.S. is losing its edge as the world’s foremost destination for venture capital investment, a new study shows, with U.S. startups capturing a rapidly declining share of global dollars invested, and Chinese companies grabbing more of the total. Because startups play a critical role in economic dynamism, the study bodes well for the global economy as a whole, its authors say, even as it points to an erosion of U.S. dominance.

Over the past three years through 2017, San Francisco startups won the most investment dollars, $81.8 billion. But Beijing area startups came close behind at $72.8 billion. New York ranked a distant third with $33.8 billion, followed by San Jose, Calif.; Boston; and Shanghai, all of which attracted close to $25 billion.

“The rest of the world, they’re playing a bigger role,” said economist Ian Hathaway, who coauthored the study with urban theorist Richard Florida. “It’s going to be a great boon for wealth creation in those countries.”

The U.S. still accounts for a large and fast-growing pile of venture cash—about half of the $171 billion invested globally in 2017, according to the study, “Rise of the Global Startup City.” But that is down from two-thirds five years earlier and more than 95 percent in the early 1990s.

Beijing tops the list of cities that in the last half decade have shown the biggest increases in attracting venture dollars, accounting for 21 percent of venture capital investment growth. San Francisco accounted for 16 percent of the growth, and New York 7 percent.