Over the past several years, I've had countless conversations with family offices about their venture capital allocation strategies, and one pattern emerges consistently: most are still concentrating their VC investments in the traditional hubs of Silicon Valley, New York, and Boston. I'm Saxon Baum, a partner at Florida Funders, recognized as the most active venture capital firm in the Southeast, and I believe these family offices are missing significant opportunities in emerging regional ecosystems.

The data tells a compelling story about regional diversification that family offices can no longer ignore. Today, I want to share why expanding VC portfolios beyond traditional coastal markets isn't just a defensive play, it's a competitive advantage that drives superior risk-adjusted returns.

The Geographic Shift Creating Alpha

The venture capital landscape has undergone a fundamental transformation. 27.7% of total VC deal value now flows into non-traditional regions, up from just 18% three years ago. This represents a structural change in how innovation happens in America.

At Florida Funders, we've witnessed this firsthand. Miami completed 73 deals worth $700 million in Q2 2025, making it the sixth most active VC hub nationwide. Cities like Austin, Nashville, Atlanta, and Denver are producing world-class companies at valuations unthinkable in Silicon Valley.

This geographic expansion creates unique opportunities for family offices. While coastal markets have become increasingly efficient and competitive, emerging ecosystems offer information asymmetries and valuation arbitrage that savvy investors can exploit.

The Valuation Arbitrage Opportunity

The Valuation Arbitrage Opportunity

The most compelling argument for regional diversification lies in persistent valuation gaps. Companies in emerging tech ecosystems consistently trade at meaningful discounts to coastal counterparts, even as the quality gap narrows. 

Data Supporting Regional Valuation Arbitrage:

Among the seven top states for seed activity, Washington had the highest median valuation in 2024 at $17.5 million, with California close behind at $17 million. California's median seed round was $3.2 million at $17 million valuation, while Florida's median seed deal was just $1.5 million, though the source doesn't provide Florida's specific median valuation for direct comparison.

The data shows significant variation in seed markets, with Florida having consistently smaller round sizes - the median seed deal falling more than 50% between 2022 and 2024, while other states like Texas maintained more steady growth. This suggests Florida companies may be operating more capital efficiently or accessing funding at earlier stages rather than simply commanding lower valuations for comparable metrics.

This creates multiple advantages for family offices:

• Lower entry multiples for equivalent growth profiles - data shows regional market variations
• Reduced competition allowing larger ownership stakes
• Better terms and board positions
• Natural alpha generation as regional markets mature

Based on our experience, we've invested in companies that, in Silicon Valley, would have commanded higher valuations for comparable metrics. This is playing out as our portfolio companies scale and compete with coastal companies for later-stage funding.

The data confirms exceptional companies exist everywhere, but coastal concentration creates pricing inefficiencies. As venture capital becomes increasingly geographically distributed—with California's share declining from 51% in 2018-2019 to 40.7% in Q1 2023—these arbitrage opportunities remain substantial for investors positioned to capitalize on them.

Talent Migration: The Ecosystem Foundation

The movement of seasoned talent from mature tech hubs into new regional markets often acts as the single most important catalyst for innovation-led growth, bringing with it skills, networks, and credibility that accelerate the development of local ecosystems

This migration creates several advantages:

1. Experienced Leadership at Lower Costs: Founders in regional markets often accept lower cash compensation for equity, extending runway and improving capital efficiency. We're seeing world-class teams building companies with half the burn rate of coastal counterparts.
2. Network Effects: As talent relocates, they bring networks, best practices, and institutional knowledge, accelerating regional ecosystem maturation and improving company quality.
3. Reduced Talent Competition: Regional markets face less competition for technical and operational talent, allowing more efficient and cost-effective team scaling.

Superior Deal Flow and Access

Regional presence provides unique advantages often underappreciated by coastal investors. At Florida Funders, our position as the most active Southeast VC firm offers insights into why local presence matters.

• Information Asymmetries: We identify promising companies 6-12 months before they appear on coastal investor radars, providing opportunities to build early relationships and secure preferred access to funding rounds.
• Relationship-Driven Deal Flow: Regional ecosystems are more relationship-driven than transactional coastal environments. Over 40% of our best-performing investments came through relationship-driven deal flow inaccessible to investors without a regional presence.
• Sector Specialization: Regional markets develop concentrated sector expertise. Tampa is the Southeast's cybersecurity capital, with over 25% of Florida's tech jobs and giants like KnowBe4, ReliaQuest, and ConnectWise. ReliaQuest recently hit $3.4 billion "triple unicorn" status. Miami leverages its Latin America gateway position for fintech and cross-border payments, with the region's fintech ecosystem growing 340% to over 3,000 startups since 2017.

Risk Management Through Geographic Diversification

Geographic diversification offers important benefits beyond return enhancement, particularly for family offices focused on wealth preservation.

• Reduced Regional Economic Cycle Exposure: Different markets experience varied economic cycles. The Southeast demonstrated a "more cautious, measured VC funding environment than other notable innovation markets (in particular, Silicon Valley, New York, and Boston)", providing a different risk profile during market volatility.
• Policy Diversification: Regional markets operate under different state and local policies. Diversifying across regions reduces single-policy environment exposure while positioning portfolios to benefit from favorable regional policies.
• Market Structure Benefits: The Southeast constitutes about 10% of early-stage deals by count but only 5% of capital, indicating a more capital-efficient market structure. During the 2022-2023 downturn, early-stage median valuations dropped from $45 million in Q3 2022 to $38.5 million in Q2 2023, with the collapse of Silicon Valley Bank particularly affecting early-stage startups that relied on specialized lending.
• Market Timing Benefits: Regional markets develop at different paces, providing opportunities to enter emerging markets early while maintaining exposure to mature ecosystems, particularly as down rounds increased from 8% in 2022 to 20% in 2023 across the broader market.

Infrastructure Development Acceleration

We're witnessing regional ecosystem maturation in real time, creating opportunities for early investors to benefit from infrastructure development.

• Capital Access Improvements: Regional markets see improved follow-on capital access as more investors recognize non-traditional hub opportunities, reducing historical "funding gaps" regional companies faced when scaling.
• Service Provider Ecosystem: Specialized service provider growth, from executive recruiters to specialized law firms, reduces operational disadvantages regional companies historically faced.
• University Partnerships: Strong research university relationships create technology transfer and talent development pipelines supporting long-term ecosystem growth.

Our portfolio companies benefit significantly from these improvements. Companies that might have needed coastal relocation for growth capital five years ago now scale effectively while maintaining regional presence.

Actionable Implementation Strategies

• Partnership-Based Approach: Rather than building regional expertise internally, consider partnerships with established regional managers. This provides immediate local deal flow and expertise access while reducing learning curves and operational overhead.
• Staged Geographic Expansion: Begin with one or two target regional markets rather than broad diversification. This allows deeper market understanding and relationship development while managing complexity.
• Sector-Focused Regional Strategies: Align regional investments with sector expertise or family office interests. Family offices with agriculture or energy backgrounds might find natural synergies with regional markets specializing in those sectors.

The Competitive Advantage Opportunity

For family offices evaluating venture capital allocation strategies, regional diversification represents more than portfolio optimization; it's a competitive advantage in an increasingly efficient market. The combination of valuation arbitrage, improved deal access, risk management benefits, and participation in growing ecosystems creates compelling risk-adjusted return opportunities.

At Florida Funders, our experience as the most active Southeast VC firm demonstrates that regional focus drives superior performance while providing meaningful diversification benefits. With 27.7% of VC deal value flowing to non-traditional regions and talent migration continuing, we expect regional markets to capture even larger venture activity shares over the next five years.

The question for family offices isn't whether regional diversification makes sense, the data clearly supports that thesis. The question is how quickly they can position themselves to capitalize on these opportunities before they become more widely recognized and competitive.

Interested in exploring regional venture capital opportunities? Connect with the Florida Funders team to learn how we're helping family offices access high-quality regional deal flow and drive superior risk-adjusted returns.