These U.S. States Have The Most Startup Investment For Their Size

Venture capital investment is a major economic driver in some U.S. states. In others, it plays a much smaller role.

To get a sense of how states compare, we took a look at per capita venture funding across 26 states that receive $700 million or more in annual venture funding.

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To put it mildly, differences were stark. Results ranged from a high of over $4,350 per capita (Massachusetts) to a low of $110 per person (Michigan). The median was around $300.

For the full state-by-state results, see the chart below:

Several data points call out for a bit more analysis. Some of the findings that stood out include:

Massachusetts’ lead is large: Notably, the standout state on the list is Massachusetts.

Although it actually ranks No. 3 for total venture funding (behind California and New York), the New England state of 7 million is by far the leader in per capita venture funding.

This isn’t too surprising. Boston and its environs, home to both Harvard University and the Massachusetts Institute of Technology, is a leading hub for biotech and deep tech. So far this year, the four largest funding recipients—health plan provider Devoted Health, e-commerce aggregators Thrasio and Perch, and identity-management provider Transmit Security—collectively pulled in over $4.2 billion.

California is way up there: The nation’s most populous state also does pretty well by the per capita metric, with just over $3,400 per person in annual startup funding. Of course, that doesn’t mean it all stays local, particularly given the rise in remote hiring and the propensity of California startups to build secondary hubs in lower-cost locations. Still, it’s an impressive haul and yet another reminder of the San Francisco Bay Area’s enduring prominence in all things tech.

New York continues to impress: Among the major American startup funding hubs, New York City has shown particularly strong growth in the past few years, and the state overall has been climbing the ranks. With more than $2,000 in per capita funding this past year, it’s clear the momentum is continuing.

Washington, Colorado and Utah outperform: Washington, Colorado and Utah are not particularly populous states, but they do have a lot of startup activity among them. The three Western states ranked in the top seven for per capita venture funding.

Vermont had a quirky year: So if you’re wondering why Vermont ranked so high, given that the state isn’t known for its thriving tech startup scene, it’s largely due to one company: Beta Technologies, a maker of electric vertical takeoff and landing aircraft. Burlington-based Beta raised over $500 million this year—which does a lot to boost per capita totals in a sparsely populated state like Vermont.

What about the other 24 states?

The remaining 24 states1 that we did not include in our per capita ranking aren’t home to the major U.S. startup investment hubs. However, among them, they do raise a big chunk of funding.

Overall, Crunchbase data showed that companies in the remaining 24 states collectively pulled in just shy of $3 billion in venture funding over the past 12 months not including Delaware, which is hard to quantify for funding as many companies incorporate in the state but do not have a significant presence there beyond that. The data does, however, include a number of big rounds this year for companies including:

• BayoTech, an Albuquerque-based provider of low-carbon hydrogen that raised $157 million;
• Lilac Solutions, a Rhode Island-based developer of ion exchange technology for lithium producers that raised $150 million;
• Lovevery, an early-learning platform based in Boise, Idaho, that raised $100 million; and
• Climavision, a Louisville, Kentucky-based weather intelligence platform that raised $100 million.

Broadly, the trend we’re seeing in the past couple years is venture capital spreading out across a wider swath of the country. This is boosted by the ability of founders to fundraise remotely and investors’ increasing willingness to back startups that are out of commuting distance.

Methodology:

Funding totals are based on Crunchbase data and include seed through late-stage venture rounds made between Nov. 5, 2020, and Nov. 5, 2021, as well as corporate venture investments and venture deals with stage not disclosed.

Illustration: Li-Anne Dias