In the recently published Venture Monitor, the National Venture Capital Association and PitchBook examine VC deal activity in 2022’s final quarter. It breaks down the data by investment rounds, exits, sector and location.
The report is considered a proxy for investments in tech-related startups because VC is linked so closely to different types of tech, such as quantum computing, AI, robotics and fintech.
Recently, Site Selection Magazine’s Adam Bruns plumbed the report and other NCVA/PitchBook data to reveal location-based findings about where VC tech money investments are flowing, both cumulatively and per capita.
“By now you could name the Top VC States and Top VC Metros with your eyes closed,” Bruns writes. But his deep dive also shows some unexpected findings.
In the wake of a surge of unicorn startups, followed by dragons that dethroned unicorns and then the plummet of VC startup funding in 2022’s second half – and the entrepreneur fears the latter gave rise to – let’s take a look at how tech startup funding might be faring in this macroeconomic climate.
The holy trinity of VCs and startups
California is at the pinnacle with more than 55,100 VC deals from 2014 to 2022. The Golden State is followed by New York in second and Massachusetts in third, both virtually unbeatable due to their financial clout and powerful life sciences engines, respectively.
Rounding out the Top 10 are Washington, Colorado, Illinois, Utah, Texas, Washington, D.C.; and Virginia.
When it comes to the Top 10 per capita, Massachusetts is the leader, followed by California, Washington, D.C., New York, Utah, Washington, Colorado, Connecticut, Delaware and Illinois.
Where are the next hot spot states?
In the pool of emerging Top 10 states for VC deals, Maryland tops both the per-capita and cumulative rankings. The remaining emerging VC states, based on cumulative deals, are Connecticut, Pennsylvania, Minnesota, North Carolina, Florida, Georgia, New Jersey, Oregon and Delaware.
Meanwhile, for the Top 10 emerging states based on per capita deals, Maryland is followed by Minnesota, Vermont, New Hampshire, Oregon, Virginia, Texas, Pennsylvania, North Carolina and New Jersey.
Why the buzz surrounding Maryland?
In December 2022, the U.S. Department of State signed an MOU with the University of Maryland College Park’s Quantum Technology Center to engage in a public-private partnership. The agreement effectively cements College Park’s position as a breeding ground for innovation and startup activity in the state.
With the intent of introducing the University of Maryland’s technologies into the market, more than 110 startups have been established. As part of their innovation push, UM Ventures, College Park, a joint project of the University of Maryland’s Baltimore and College Park campuses, has formed corporate-sponsored research and clinical trial agreements for industry engagement.
For context, UMD ranked No. 7 in the Top 50 undergraduate schools for entrepreneurship studies in the 2023 entrepreneurship rankings published by The Princeton Review and Entrepreneur magazine.
Top VC metro areas, and their emerging contenders
Not surprisingly, Silicon Valley tops the list’s Top 10 VC metro areas on a cumulative deal basis. The San Francisco and San Jose metro areas are second and third, respectively, followed by the Boston; New York; Austin, Texas; Seattle; Los Angeles; San Diego; and Boulder, Colorado, metro areas.
Durham, North Carolina, leads the 10 emerging VC metro areas on a cumulative deal basis, followed by the Salt Lake City; Denver; Chicago; Bridgeport, Connecticut; Provo, Utah; Ann Arbor, Michigan; Minneapolis-St. Paul; Philadelphia;and Miami metro regions.
The Top 10 VC metros per capita are Silicon Valley; San Francisco; San Jose; Boston; Boulder, Colorado; Durham, North Carolina; Austin, Texas; New York; Seattle; Ann Arbor, Michigan; and San Antonio, Texas.
The Top 10 emerging VC metros per capita are San Diego; Salt Lake City; Charlottesville, Virginia; Los Angeles; Provo, Utah; Trenton, New Jersey; Bridgeport, Connecticut; Denver; Burlington, Vermont; and Ithaca, New York.
The ascent of Utah as a tech hub
The list of the Top 10 emerging VC metros areas per capita reflects the ascent of Utah, with the Salt Lake City and Provo regions at position two and five, respectively. Salt Lake City also occupies position two on the top emerging VC metros for cumulative VC deals.
Perhaps this isn’t so surprising. In August 2022, U.S. News & World Report ranked Utah as the No. 3 best state for growth and the No. 2 best state for employment opportunities, and the Milken Institute ranked Provo first and Salt Lake City third on its 2022 Best-Performing Large Cities list.
In Salt Lake City, a proposed innovation district would bring together research, education and commercialization prospects. If approved, the district would be managed by the University of Utah, with which the school has ample experience. Its 1968-established University of Utah Research Park is home to 48 businesses and 81 university departments with a combined workforce of more than 14,000.
North Carolina’s growing appeal for tech investors
The Durham metro region, ranking first among the Top 10 emerging VC metro areas and sixth among Top 10 VC metros per capita, is part of the Research Triangle area. Comprising the Raleigh-Durham-Chapel Hill region, the name stems from its proximity to three major research universities — Duke, the University of North Carolina at Chapel Hill and North Carolina State University — as well as its position as a nexus for tech firms.
Durham is also home to a slew of venture capital firms, such as Intersouth Partners, which oversees $780 million across seven limited partnerships and bills itself as “the largest VC fund in North Carolina and one of the largest in the Southeast.”
Durham-based Bull City Venture Partners, which invests in startup tech companies in the Southeast and Mid-Atlantic, closed a $53 million fund in May 2022. North Carolina’s startup economy is poised to surpass that of the nation overall this year, BCVP co-founder and general partner David Jones told WRAL TechWire.
One of the risks of entrepreneurship, particularly for those in hot zones, is keeping up with rising rents. According to the annual Tech-30 2022 CBRE report, which aims to gauge the tech industry’s effect on office space, markets best-positioned for growth include Boston, Silicon Valley, Raleigh-Durham and San Diego.
While some startups are investing in hiring full-time staff and leasing sizable office space, others are turning to IT, HR, and accounting outsourcing services for startups, in a bid to keep costs under control and diminish the need for pricey real estate.