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Illustration: Aïda Amer/Axios

Venture capitalists have been historically reluctant to invest in startups based too far from home, thus making it it easier for "good ideas" to get funded in the Bay Area or the Acela corridor than anywhere else. 2020 may have finally changed that dynamic.

Why it matters: This could create a virtuous cycle of economic opportunity in cities and regions that have been largely left out of America's tech boom.

The history: Many venture capitalists used to abide by the so-called "20 minute rule," whereby they wouldn't invest in a company located more than a 20-minute drive away from their home or office.

One Boston-area investor had his own subway spin on it, saying he wouldn't even meet with companies located past a certain subway stop on the MBTA's Red Line.

  • In many ways, these guidelines made sense. Investing in a startup is often viewed as a hands-on endeavor, particularly if the venture capitalist is going to take a board seat. If a problem arose, they wanted to be present.
  • Plus there could be major personal life complications from having to attend quarterly board meetings for portfolio companies in eight different cities, plus conducting due diligence for many more potential investments, while also trying to make those dance recitals or Little League games.
  • This isn't to say that VCs never invested far from home, but such deals often needed to pass a higher threshold.

The new normal: The pandemic forced venture capitalists to attend board meetings via Zoom, and often conduct due diligence that way too. And they learned that, while often missing the intimacy of in-person interaction, their work didn't suffer.

  • What this means is that a San Francisco-based VC now feels more comfortable investing in a Midwestern or Southeastern U.S. startup, because they aren't also committing to years of road trips.
  • It also means those non-coastal startups have improved chances of getting audience with a wide group of prospective investors.
  • Buttressing both of these developments have been several large IPOs in 2020 for VC-backed companies based in areas like Columbus, Ohio (Root Insurance) and coastal North Carolina (nCino).

The bottom line: Almost every U.S. city and state has tried capture some of Silicon Valley's magic, hoping that local talent will create a successful tech company that then births a flywheel for more. It's rarely worked, in part because the entrepreneurs have struggled to raise money.

  • Going forward, things should be different.

Go deeper

Dan Primack, author of Pro Rata
Jan 14, 2021 - Economy & Business

Venture capital's record-smashing year

Illustration: Rebecca Zisser/Axios

Just weeks into the pandemic, we reported that venture capitalists were still doing deals, even though their offices were closed and their flights were canceled. But we didn't quite foresee the WFH gusto.

Driving the news: U.S.-based venture capital hit an all-time record in 2020.

Scoop: Stephanie Ruhle to replace Brian Williams on MSNBC

Photo: Nathan Congleton/NBCU Photo Bank/NBCUniversal via Getty Images via Getty Images

MSNBC will soon announce plans to move morning anchor Stephanie Ruhle to the 11 pm ET hour that Brian Williams turned into an elite destination, two sources familiar with the move tell Axios.

Details: The 9 am ET hour, currently hosted by Ruhle, will become part of MSNBC's flagship morning show, "Morning Joe," which currently runs from 6 am to 9 am ET.

Oath Keepers leader denied bail on Capitol riot sedition charge

Oath Keepers co-founder Elmer Stewart Rhodes. Photo: Susan Walsh/AP

A federal judge ordered Oath Keepers leader Stewart Rhodes to remain jailed Wednesday until trial on charges stemming from the Capitol riot.

Why it matters: The judge said the most prominent far-right figure charged in the Jan. 6, 2021, insurrection had access to weapons and his alleged "continued advocacy for violence against the federal government" gave credence to prosecutors' view that, if released, Rhodes could endanger others.