Anyone who follows the private equity/venture capital world knows that political entities attempt to recruit business startups. Over the past few years, leaders in various areas, including New York, Utah, and other traditionally less important areas, have promoted the growth of their startup scene – and their efforts are being rewarded.
What Do the Numbers Show?
Price Waterhouse Coopers has a report on total venture capital investments since 1995. Total investments peaked in the first quarter of 2000 at about $28 billion. Following the peak, the technology boom bottomed out in the first quarter of 2003 at about $4 billion. After bottoming, venture capital investments doubled to about $8 billion in the fourth quarter of 2007 (the doubling doesn’t look that big when the technology boom is included in the graphic). The housing bust knocked off $4 billion, reaching a trough in the first quarter of 2009 at a little below $4 billion.
Since bottoming in 2009, venture capital investments have accelerated again, growing to a little less than $6 billion in the first quarter of 2013, and since, expanding to a projected $10 billion in the second quarter of 2014.
Slicing the Numbers by State
Let’s take a look at the data since 1995. The kings of venture capital world are located in California. Far behind, in second and third places, are businesses headquartered in Massachusetts and New York. A comparison of how venture capital rankings have changed by year by state follows the line plot.
Perhaps surprisingly, there’s been some big shifting since 1995 among those states not in the top 4 (California, Massachusetts, New York, and Texas), with the biggest change occurring in Utah. The startup scene in Utah has grown from a ranking of 27th in 1995 to 6th today. The rise of Utah is amazing given that the population in Utah is less than 1 percent of the total population in the U.S.
Among the states with deterioration in ranking are Kentucky, Louisiana, South Carolina, Tennessee, and New Jersey, which include some of the biggest decliners.
Startup Scene Growth Since Start of Recovery (after 2009)
On top, again, by a far margin, are startups headquartered in California, at over $72 billion from the first quarter of 2009 to the first quarter of 2014. In second place are startups located in Massachusetts at about $15 billion. Rounding out the top five are New York ($10 billion), Texas ($6 billion), and Washington ($4 billion).
At the other end of the spectrum, businesses headquartered in Alaska (PwC has $0), Wyoming ($11 million), Mississippi ($14 million), Hawaii ($23 million), and West Virginia ($25 million) have seen little growth in venture capital investments since 2009.
Conclusion
Overall, venture capital investments continue to grow during the economic recovery. Perhaps surprisingly, when slicing the growth in venture capital investments by state, the recovery has largely been dominated by investments in firms located in California, Massachusetts, New York, and Texas.
Although the numbers show firms in California, Massachusetts, New York, and Texas dominating the venture capital world, some areas show significant gains over the years, including, for example, Utah. The home of the 2002 Olympics has seen venture capital within its borders expand from a rank of 27 in 1995 to a rank of 6 in 2013. On the other end, venture capital investment in states such as South Carolina or New Jersey has lost ground over the past 15 years.
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