Regional Venture

The Other Side: Not Every Part Of The US Is Awash In VC Dollars

Illustration of founder reaching for money. Something Ventured

Editor’s note: This article is part of Something Ventured, an ongoing series by Crunchbase News examining diversity and access to capital in the venture-backed startup ecosystem. Access the full project here.

Although it seems like venture dollars abound in the U.S., with headlines of $1 billion raises and new funding totals hitting highs, not every area of the country sees a flood of investment money for its startup ecosystem.

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Through the first 10 months of this year, 11 states still had yet to break the $100 million barrier when it comes to the total amount of venture capital startups in those states received, according to Crunchbase data. While California startups have taken in nearly $120 billion in venture this year, Mississippi has barely surpassed the million-dollar mark.

This year, along with Mississippi, the states of West Virginia, South Dakota, Alaska, New Hampshire and Hawaii have not seen even $50 million of venture come into the startups that call those states home.


“Every city has always wanted to be like Silicon Valley,” said Meli James, president of the Hawaii Venture Capital Association and cofounder at accelerator program Mana Up. “That’s always really hard to replicate.”

However, areas like Texas, North Carolina and Georgia have come closer to copying that success, while other areas have clearly been left behind. And while it may be easy to write off many of the states that struggle for venture dollars as having smaller populations or being less affluent, those in the venture capital ecosystem there see potential, even if results are still hard to come by.

The Magnolia State

Tony Jeff moved back to his home state of Mississippi 19 years ago—after time in both the corporate and entrepreneurial worlds—to take a position at Innovate Mississippi, which looks to accelerate startups and drive entrepreneurship throughout the state.

While he believes some venture numbers are underreported for the state—as many in-state startups decline to disclose what they raised, he said—he is honest about why the state has relatively low numbers.

“When you talk about venture capital in Mississippi, you are talking venture with a small ‘v’” said Jeff, now president and CEO of Innovate Mississippi. “We don’t have any venture capital firms. We just have angels and family offices and individuals, so that’s one reason.”

The area also has been generally defined by more traditional smokestack industries, like auto, than tech. Still, Jeff said he has seen more startups emerge in the last three to five years as the tech economy continues to proliferate.

“The question becomes: Can companies effectively grow here?” he said. “That’s what this really will come down to.”

Startups have been founded in the state, only to eventually leave to find more venture money, talent and, in some cases, just live the Silicon Valley lifestyle. Jeff said Curtsy—an app that lets women buy and sell clothing, shoes and accessories on their phone—is a good example of a startup from students at the University of Mississippi that eventually moved to San Francisco as it looked to grow.

“We lose these companies at the early or middle stage,” he said. “They go to Austin or New Orleans.”

The other issue the area struggles with, he said, is that there is no true driver for the tech industry in the state since its Worldcom days ended back at the start of this century.

Though Jeff now sees a concentrated focus on some space and marine/blue tech in the southern part of the state along the Gulf of Mexico, the rest is more of a hodge-podge of tech and apps that don’t have a unifying theme.

“We don’t have that focus here, but we would like that,” he said.

Looking for focus

The ability for a startup ecosystem—especially a young one—to be able to have a clear driver can be important. That’s something Matt Harbaugh of Mountain State Capital has seen before.

Mountain State has two offices, one in Pittsburgh and one in Morgantown, West Virginia—the latter being in the state that has seen the second-least amount of venture capital dollars flow into it this year at just more than $9 million.

“I’m surprised it’s that high,” joked Harbaugh.

A few years ago, the company closed its $20 million seed fund, which took three years to raise. It now has invested in about two dozen companies in the Greater Appalachian region—defined as the area between western Pennsylvania and western North Carolina. Those investments include four companies based in West Virginia.

Harbaugh, who has been in venture in the area for nearly two decades, said he has seen a real concerted effort to grow the tech ecosystem in the state. That includes the creation of the West Virginia Jobs Investment Trust—a public venture capital fund created to develop, promote and expand West Virginia’s economy—and a strong push by the state’s largest school, West Virginia University, which has partnered with noted alumni like former Cisco president and CEO John Chambers to push the industry there forward.

Those efforts have produced some fruit for a still nascent startup community. Morgantown, West Virginia-based InspectionGo, a home inspection company, has successfully raised money. Aspinity, a neuromorphic all-analog integrated circuit technology developer, is a startup out of West Virginia University and has been able to raise nearly $12 million since being founded in 2015, according to Crunchbase data. While the company has since moved up the road to Pittsburgh, it is still something of a start for the startup sector in West Virginia.

“This is a marathon, not a sprint,” Harbaugh said. “Will West Virginia ever be Silicon Valley? No, and it shouldn’t try to be. But it can have its own ecosystem. But that only works when you have startups that understand their industry and the market they are in.”

Harbaugh said he has seen focus in the state on areas such as energy—the US Department of Energy has a national lab in the state—and life sciences due to the presence of the WVU Medicine health system. With a lack of venture firms available in the area, Harbaugh said it would help if the area can develop a sharp concentration on a few areas to lure in very sector-focused funds to invest.

He compared it to how Pittsburgh has become a small but emerging hub in areas like robotics and autonomous driving. While the venture world there is still small comparatively, it is larger than a few decades ago.

“It took Pittsburgh 20 years to get its VC world moving,” he said. “In 20 years, can the entire state (of West Virginia) have the same activity that Pittsburgh is seeing? Maybe, I think.”

Leaving home

Although optimistic, Harbaugh calls it “really difficult” for startups in West Virginia to raise anything above a seed round. That issue, along with the need to hire talent, often lead founders and entrepreneurs to pull up roots from these smaller states with few or no VC firms and look for greener pastures with venture dollars.

James has seen the same in her own home state of Hawaii—which has received the sixth-fewest VC dollars this year, and the fifth-fewest in the last nearly six years overall.

“We’ve seen it before,” she said. “As soon as a company starts getting traction, it leaves. It follows the talent and its customers.”

While James helped found Mana Up—the only accelerator is the only fund focused on Hawaii-located companies, she said, she acknowledges the issues Hawaii faces as a venture hub.

“It’s always been traditionally challenging here,” said James, adding that some state tax incentives a couple of decades ago did not help build the sustainable tech ecosystem many had hoped.

However, she remains optimistic by what she sees and hears. There is a growing startup community around sustainability issues in the state—which makes sense for an area with limited resources—including agriculture and energy.  James also points to Volta Charging, which was founded in Hawaii about a decade ago, recently going public as an illustration of what the state can produce.

Pandemic changes

James also said she has seen more venture capitalists move to Hawaii, especially during the pandemic—as where people live has become less important. She hopes that may increase the venture dollars the local startup community will see.

Jeff has not seen more VCs moving to Mississippi, but he does believe the pandemic  has brought more interest from out-of-state capital as travel was reduced and meetings were held over Zoom.

“I do think that is changing a little due to the pandemic,” he said. “I think you are seeing venture getting more geographically agnostic. I used to hear VCs say, ‘I’ll invest anywhere; as long as there is a direct flight from San Francisco to there.’ Well, you need to get on a couple of planes to get from San Francisco to Mississippi.

“But we are definitely having more people reach out to us now,” he said. “That didn’t happen so much prior to the padmic. I think that is a positive. We need to improve access to capital and talent to have these companies stay.”

Illustration: Dom Guzman

Note: An earlier version of this story misidentified Tony Jeff.

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