In recent years, the venture capital and private equity industries have gained some serious ground. Although industry conditions have improved significantly in 2014, there’s still room to grow, at least if one thinks the technology boom is where the industry needs to be. Of course, even if one thinks the technology period was too much of a bubble, there’s still quite a bit of room for improvement before the industry even gets close to the early 2000s heydays.
Where has venture capital activity grown the strongest in recent years? The following is a look.
The first graphic is a map view of the data for where it looks like 2014 will end. As is likely no surprise to any venture capital or private equity professional, (recorded) venture capital money flows to Silicon Valley in large amounts, estimated at about $22 billion in 2014.
Just as interesting as the flow of money to Silicon Valley is the amount of venture capital that gets recorded in middle America. In fact, if one summed up all the venture capital activity in states not touching an ocean, the number is still far behind that of California.
Here’s bar chart look of the same data.
The massive rise of cash flow to firms in California is readily apparent. In 1995, about $3.2 billion went to entrepreneurs in California. In the same year, the area where entrepreneurs received the second most investment dollars was Massachusetts, at about $697 million. The difference amounted to $2.5 billion.
Fast forward to 2014. An anticipated $21.8 billion will be invested in entrepreneurs headquartered in California. By contrast, an estimated $3.8 billion will go to entrepreneurs headquartered in Massachusetts. The difference: $18 billion.
Some other interesting observations are worth mentioning.
First, the rise in venture capital activity in New York is amazing. In 1995, an estimated $303 million went to entrepreneurs in New York (placing entrepreneurs headquartered in New York sixth among all entrepreneurs). Switching to 2014, an estimated $3 billion will go to New York-based entrepreneurs. The rise of entrepreneurs in New York is perhaps only bested by the rise of entrepreneurs headquartered in Utah. From 1995 to 2014, venture capital investment in Utah has increased from $23 billion to an estimated $850 million.
The rise of innovation in Utah and New York is countered by the rapid relative decline in other areas. The second chart that follows has relative growth in venture capital dollars (only states with somewhat reliable 2014 numbers are shown). On the bottom of venture capital decliners is Louisiana at -94%, followed by South Carolina (-93%), Missouri (-82%), Iowa (-80%), Tennessee (-73%), New Jersey (-68%), Vermont (-52%), Nebraska (-34%), and Delaware (-10%).
Overall, the venture capital industry continues to see rapid movement of dollars to locations of the entrepreneurs. The industry is still dominated by firms headquartered in California, with entrepreneurs in other states – notably New York and Utah – on the rise.
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