Useful Stats: VC investments, tech-startups are heavily concentrated

Last week, SSTI looked at recently released data on venture capital dollars and deals by state, finding that total investment has skyrocketed but remains heavily concentrated in a few markets. This week we examine this data through two additional lenses: VC investment intensity and VC investment per technology startup.

Late last year, the Information Technology and Innovation Foundation (ITIF) released data on tech-startups by state, which they define as firms 10 years old and younger in 10 R&D intensive industries. These include six manufacturing industries like medical devices and semiconductor machinery, and four service industries like software publishing and scientific R&D.

Young R&D-intensive technology startups are the types of companies that attract venture capital; there is a very high correlation (0.86) between the quantity of tech-startups in a state and its venture capital activity.

Based on data from the NVCA-Pitchbook Venture Capital Monitor, ITIF, and the Bureau of Economic Analysis, SSTI has prepared information on VC investment intensity and VC investment per technology startup, available in Excel format below. The map below shows the amount of venture capital investment a state saw in 2016 per each tech-startup identified by ITIF.

The states with the most VC investment per tech startup in 2016 were California ($1.3 million per startup), Massachusetts ($1.0 million per startup), and New York ($846,383 per startup). Utah, Washington, Pennsylvania, Delaware and Colorado all averaged more than $200,000 per startup. Alaska, Wyoming and Mississippi were the only states that averaged less than $10,000 per technology startup.

While VC investment and startups correlate closely, several states rank considerably higher in one factor than the other. For example, Utah ranks 25^th in the number of technology-startups and 10^th in total venture capital. Vermont ranks 47^th in the number of technology startups and 31^st in VC funding, while Delaware ranks 43^rd in technology startups and 28^th in VC funding. Using ITIF and NVCA-Pitchbook data, the chart below looks at each state’s ranking for technology startups and VC funding in 2016. 

Intensity, as measured by the share of VC investments to a state’s total GDP, is another way to measure the concentration of venture capital. Using an average of a state’s GDP during the first three-quarters of 2017, the map below looks at VC investment intensity by state for 2017.

For the country as a whole, VC investments represent roughly 0.4 percent of GDP. However, five states/territories have a level of intensity that is higher than that average: Massachusetts (1.7 percent of GSP), California (1.6 percent), and New York (0.8 percent), Utah (0.6 percent), and the District of Columbia (0.5 percent). In the median state, VC investments are just 0.1 percent of GSP.

The data used to inform this analysis can be found in the downloadable spreadsheet below.