Venture capital funding in states with historically strong startup ecosystems declined in 2022. In Georgia, a similar story played out.
Georgia venture capital funding decreased 43% between 2021 and 2022, from a record $4 billion to $2.3 billion.
That reflects the national trend. Venture capital investors pumped $238 billion into U.S. startups in 2022 — a 31% decline from 2021's record haul of $345 billion, according to Pitchbook, a firm that tracks venture funding totals across the country.
But some of Georgia's Sunbelt competitors were exceptions to the big dip.
Florida and North Carolina, home to high-growth metros with expanding innovation ecosystems, each saw funding upticks in 2022. Florida and North Carolina are often in competition with Georgia for major economic development deals. Illinois, Michigan and Virginia also saw funding increases.
Startups in Florida raised $6.8 billion in 2022 compared to $6.6 billion in 2021. In North Carolina, startups raised $4.3 billion, up from $3.8 billion.
Markets like Miami, Orlando, Tampa and Raleigh drove those gains.
It's important to note that one or two large deals can tip the scales when looking at state or metro totals.
In Illinois, for example, startups raised a record $10.3 billion, but more than half of that was from Walgreens' $5.2 billion investment in health care startup VillageMD.
Their growth comes as traditional startup hubs often saw funding fall precipitously from 2021.
California, which draws the most venture funding by far, posted a 35% decline — from $162 billion in 2021 to $104 billion in 2022. New York (down 40%) and Massachusetts (down 37%) posted similar declines.
Those three states account for the vast majority of startup funding historically. But whether it's the rise of remote work, the migration of people to states with lower cost of living or the growth of nontraditional startup hubs that allow entrepreneurs the freedom to build venture-backed businesses outside of Silicon Valley, the stranglehold California, New York and Massachusetts once had on the innovation economy is starting to give ground to other areas of the U.S.
It's a sentiment shared by Steve Case, the founder of VC firm Revolution and the Rise of the Rest fund, which invests in startups outside of traditional tech hubs.
Case says that the "era of a few superstar cities dominating the innovation economy is over," he told me in an interview.
"We have seen more interest in different communities in terms of what’s going on with startups," he said. "We’re seeing more people start companies. We’ve seen more investors, both locally and nationally, backing companies ... We’re starting see more significant exits and people are starting to say, 'Huh, maybe these places really can launch some pretty interesting, pretty valuable companies."
