I think perhaps the way to think about VC firms outside of the SF Bay Area is the converse — Why Do They Take More Seeming Risk? Why do they paying seemingly much higher valuations? I mean, that company just came out of YC, has 3 customers, as gets a $12m pre????? And I’m at $1m pre with 30 customers??
It’s outcome related. It’s the VC firms in SF Bay Area and “Silicon Valley” in an extended sense that have captured the majority of the returns from Unicorns.
If you are chasing Unicorns ($1b+ exits), you can pay more, invest more … looking for higher absolute returns.
If you are chasing $50m-$100m exits, you have to have a very low entry price, low amounts of invested capital, etc. to achieve 3x+ returns across a portfolio.