Mark Cuban Explains Why He Invests Outside Silicon Valley

Being outside the Bay Area bubble has its advantages.

Mark Cuban
Mark Cuban looks outside of Silicon Valley when it comes to investing in innovative startups. GP Images/Getty Images

If you’re a startup founder looking for an investment from Mark Cuban, there’s no need to be based in Silicon Valley.

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These days, the serial entrepreneur, investor and Shark Tank star looks outside the San Francisco Bay Area when it comes to funding innovative companies. In an interview with Recode’s Kara Swisher, Cuban explained that the concentration of capital in the world’s largest technology hub is being spread out across smaller cities.

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“It’s changed, it’s a lot different now,” Cuban said of tech founders needing to move their operations to San Francisco in order to get investor attention. This is especially true for those developing agriculture or artificial intelligence products.

“Over the last 10 years, you need a laptop and a broadband connection, which is more prevalent, and a cloud account, whether it’s AWS or whatever, and now with AI, it’s even more so,” he explained. In fact, being located outside of the Bay Area bubble can sometimes act as an advantage.

“When you’re in those concentrated areas, you’re competing for resources, whereas AI isn’t based in Silicon Valley,” he explained. “The best technologists are coming out of Montreal, Boston, Pittsburgh, Austin. Silicon Valley can be their own little world, it’s an open opportunity for us.”

Over the past few years, startup hubs have begun to spring up in many mid-sized cities outside of San Francisco. While the majority of capital is still concentrated in major metro areas such as Silicon Valley, New York, Los Angeles and Boston, the tech industry has experienced an emergence of mini innovation hubs in the past decade. While Cuban pointed to millennial-friendly, gentrifying cities such as Pittsburgh and Austin as the new frontier for tech, even small college towns like Boulder, Colorado and Lexington, Kentucky have seen growth in venture capital-funded startups lately, according to recent data.

Cuban noted that Silicon Valley’s major venture capitalists tend to go for “unicorn” status or startups on the verge of an exit, such as an IPO. However, for smaller investments, looking in untapped markets is best.

They want to be in Lyft and Uber right before they go public because they… play all kinds of games and say they’re in unicorns,” he said. “The reality is, the companies I get that I’ve invested in, $5,000, $10,000, $50,000, $500,000, a million, whatever it is, they’re everywhere but Silicon Valley and they’re my best companies.”

Mark Cuban Explains Why He Invests Outside Silicon Valley