Venture Capital Is A Blue State (And County) Business

A lot has been made about the cultural, geographic and demographic differences of Red and Blue states.

Another stat to add to the pile is this: So-called Blue or Democrat-leaning states take in the overwhelming majority of venture capital funding. Among Red, or Republican-leaning states, the only two that stand out as major startup investment hubs are Texas and Utah.

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Those are the findings from an overview of venture-stage funding based on Crunchbase data for the past year. 1

Overall, states in the Blue column for the 2020 election (plus Washington, D.C.)  pulled in $70.1 billion over the past year for the funding stages we tracked. Red states, meanwhile, drew just $5.68 billion.

(We did not include totals in either column for three states that have yet to confirm presidential election outcomes when making these calculations: Pennsylvania, Georgia and Nevada. However, none of those states will move the needle on the broad finding, which is that startup funding activity prevails in Democratic strongholds.)

It’s staggering to consider that “Blue States” rake in roughly 12 times the venture capital of Red States. If we look closer, however, the Democrat-leaning advantage is even more pronounced.

That’s because among Republican-leaning states that do receive venture capital, the vast majority goes to Democrat-leaning metropolitan areas.

Take Texas. Voters there have consistently favored Republican presidential candidates for four decades. But Austin, the metro area that commonly brings in a majority of the state’s venture funding, is known for its liberal-leaning politics.

North Carolina, a bit of a swing state that tilted Red in 2020, shows a similar pattern. The hub for startup and venture capital activity is the Research Triangle region, which leans left.

Utah is more mixed. Provo and Utah counties, both rich in funded startups and tech talent, are both right-leaning. The Salt Lake City metro area, meanwhile, leans slightly left.

We’ve broken down the state-by-state totals below, divided alphabetically into Red, Blue, yet-to-be-determined for the 2020 presidential election:

What to make of it

Much of the divide over which areas get venture funding is an urban vs. rural matter. Startup funding tends to flow to regions with the following characteristics: Major research universities, a highly educated population, local venture investors, and an existing talent pool in tech and other industries favored by startups. Few rural areas, which tend to be Republican-leaning, fit that description.

That said, we do see startups thrive in deep-Red states and in areas without much local VC presence. Alabama-based grocery delivery startup Shipt, for instance, raised over $65 million in venture funding before selling to Target for $550 million a few years ago.

Indoor farm operator AppHarvest of Morehead, Kentucky, has raised more than $135 million in venture funding since last year and recently announced plans to go public. The company operates large-scale indoor farms in the Central Appalachian region, with its first produce, tomatoes, to be harvested early next year.

Perhaps as more venture funding flows to areas such as agtech–where more of the knowledge base is outside major metro areas–rural areas and smaller cities will see gains. After all, no one would pick Silicon Valley as the most cost-effective location for a giant tomato farm.

Personally, I’d like to see more venture capital going to these areas that haven’t historically been magnets for funding. Even though most newly minted startups won’t make it, those that do can be a major engine of job creation and economic growth for their local communities. It’d be nice to see more of those gains going to places that aren’t already awash in tech wealth.

Illustration: Dom Guzman

  1. We tallied state-by-state activity for Series A through E rounds, counting total investment and round counts.

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