For years, Silicon Valley wasn’t the main place many venture capitalists looked for deals — it was the only place. But the Bay Area is beginning to lose its once vice-like grip on talented workers, and its startup investment market is looking dangerously overheated. Now VCs are lifting their gaze from California and scouting for North America’s next tech powerhouses.

In Toronto, where I’ve personally worked in tech as an entrepreneur and a VC over the past few decades, there’s a fresh influx of deal-hunting VCs. After years of sluggish growth in venture capital, startups here now routinely raise rounds in the tens of millions. Silicon Valley Bank is expanding here, too. Salesforce Ventures, which already has half its investments outside the Valley, has a new $100-million Canadian fund.

Toronto is not unique. A recent report from CB Insights shows funding growing strongly in eastern cities, like New York City and Boston, as it declines in Silicon Valley. A chief reason: VC money once tethered to the Bay Area is following tech talent to emerging hubs across North America and the world.

Scale matters to roving VCs

VCs may be more willing to rack up the air miles, but they won’t be scouring the backroads looking for investment-worthy companies. “Growing tech hub” is a tag every city tries on, but only a few have the civic, business, and academic infrastructure to back it up. That’s why startups, and the cities they call home, should expect VCs to prioritize places where the tech ecosystem is already strong — with deep pools of talent and a good pipeline of potential deal-flow — areas that make sense for VCs to return to again and again.

In many cases, these are places where the intellectual infrastructure has been built over decades, based around leading universities or existing industrial expertise. In Toronto, for instance, global companies like Samsung, LG, and others are spending hundreds of millions of dollars on artificial intelligence labs. This progress is the fruit of decades spent cultivating a local talent pool built up by the University of Toronto’s pioneering machine learning research, which dates back to the 1990s.

In the U.S., the Rust Belt is becoming the Robot Belt as investment moves in to automate ailing manufacturing facilities. The impact of efforts to democratize technology development, especially in the area of artificial Intelligence, is starting to expand beyond those with higher educations and degrees to include workers from all backgrounds. In Kentucky, for instance, local outfit Bit Source launched a program to teach laid-off coal miners to code — giving them new skills and purpose.

In Pittsburgh, Carnegie Mellon’s renowned AI faculty is attracting the attention of large tech companies like Uber. Other cities with established academic prowess and local tech scenes, like Austin, Texas — home to the University of Austin-Texas — are becoming increasingly popular places to start businesses and relocate operations as the cost of doing business in the Bay Area rises.

Early-stage startups stand to benefit

Two broad trends are happening in venture capital right now: The biggest funds are getting bigger — Sequoia is now at over $6 billion — and the investment market in the Valley is getting frothier. Series A is the new Series B, goes the mantra. In looking beyond the Valley, many VCs are scouting seed-stage deals — and they’re finding solid companies to invest in.

Ironically, the past lack of venture capital in emerging tech cities like Toronto, Chicago, and St. Louis has made their early-stage companies more robust, creating scrappy entrepreneurs with the hustle to bootstrap their startups for longer. Expect to see more deal-hunting VCs drawn to the seed-stage market by the combination of talented entrepreneurs and startups with proven traction.

New venture capital doesn’t want the same old targets

It’s still early days, but I suspect VCs aren’t looking for carbon copies of companies they could have found more easily in Silicon Valley. Case in point: Scott Barclay, a partner at VC firm Data Collective, recently wrote about an investment in Toronto-based wound-care company Swift Medical with an emphasis on the company’s “empathy” for patients. Barclay wasn’t focused on the technology used to achieve elevated levels of care but on the mission behind that tech.

Many other VCs I speak to find the inclusive and collaborative nature of emerging tech cities a major attraction because they encourage companies that have deep domain expertise and are solving important problems in sectors like health care or financial technology. Many have also taken note of the tech world’s failings when it comes to diversity. Some investors are proactively writing clauses and policies around corporate culture into investment agreements in order to ensure startups scale with diverse teams of people, develop and maintain inclusive company cultures that embrace different perspectives, and achieve ethical accountability throughout company ranks.

As investment money flows to new cities, the challenge will be to show that these regions can do more than just create companies — that they can grow them, too. VCs want to see a return on their investment, and that means significant exits in an age when high-value companies are staying private longer than in previous innovation cycles. The challenge will be for rising cities to connect all the dots in the innovation supply chain to support growth from early-stage startup to globally focused scale-up. Meanwhile, one thing is clear: Talent provides necessary fuel for the innovation economy. And this pattern of VC investment following talent diversification across sectors and geographies is good news for entrepreneurs, VCs, and economies.

Yung Wu is the CEO of MaRS Discovery District.