The growth of venture capital-backed jobs is outpacing job growth at other companies across the nation, according to a new report from the National Venture Capital Association, Venture Forward and the University of North Carolina Kenan Institute of Private Enterprise.
Employment at the VC-backed companies in this study grew 960% between 1990 and 2020, compared to the 40% increase in total private sector employment during this time.
Massachusetts ranked fourth among states for employment at venture-backed companies, following California, Texas and New York. A breakout of the state’s congressional districts put the region north of Boston as the top provider of VC-backed jobs in Massachusetts. The district comprising the majority of Boston came in third for its total VC-backed jobs.
The study suggests that 62.5% of VC-backed jobs are outside of California, Massachusetts and New York, the states that routinely draw the most venture capital. In 2020, these three states brought in 73% of VC dollars invested that year.
Brent Kleiman, founder and CEO of recruiting services firm Argosight, said the rapid employment growth at VC-backed companies in Massachusetts doesn’t surprise him.
“The number of companies that are getting funded at the earlier stages up through VC has gone up dramatically,” Kleiman said. “And we’re seeing that translate into they’re all trying to hire people to make their vision a reality.”
Kleiman tied the rapid growth of VC-backed companies to new entrepreneurship programs at colleges, crowdsourcing platforms to boost early-stage funding and the expansion of the investor community. At the same time, he said employees seek more mission-driven innovative companies and use more readily available information to connect with those companies.
“The pandemic I would argue has even accelerated it even more,” Kleiman said. “People are like, what am I doing? Am I doing something I love? Whether it’s they start something or they join something because they have a passion for it.”
Among the findings from the report:
- More than 62% of employment at VC-backed companies in 2020 was in states other than California, Massachusetts or New York. In 2020, these three states collected 73% of VC dollars in the U.S. Since 2004, the annual share of VC investment in these three states has never dipped below 59%.
- Excluding the top three (California, Texas and New York), states with noticeable shares of employment — at least 2.5% of total employment — include Colorado, Florida, Georgia, Illinois, Massachusetts, New Jersey, Pennsylvania, Virginia and Washington.
- Massachusetts is among 24 states, plus Washington, D.C., exhibiting an annualized growth rate of at least 4.0% since 2015. Massachusetts’ growth rate is 4.4%.
- Employment at VC-backed companies grew at roughly eight times the pace of employment at non-VC-backed companies.
- The annualized growth rate of employment at VC-backed companies between 1990 and 2020 was 8.2%, compared to 1.1% in the private sector overall.
- In the years after the 2008 financial crisis, annual job growth at the report’s set of VC-backed companies exceeded 4%.
Eleven states had more than 100,000 employees at venture-backed companies in 2020. They are:
- California, 935,322
- Texas, 274,847
- New York, 248,657
- Massachusetts, 235,257
- Florida, 152,443
- Pennsylvania, 128,095
- Illinois, 125,696
- Colorado, 123,186
- Washington, 115,387
- Virginia, 105,223
- New Jersey, 104,281
