Startup funding in traditional tech epicenters like California and New York fell around 40% last year while North Carolina maintained its status as a hub for new businesses.
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.
North Carolina was one of a handful of states that saw funding upticks in 2022. Startups in North Carolina — driven by the Raleigh region — raised $4.3 billion, up from $3.85 billion in 2021. That figure includes a $2 billion haul by Cary's Epic Games last April.
The Council for Entrepreneurial Development in Durham recently released its annual Venture Report, showing that 246 companies in the state raised funding in 2022. That’s 25 more companies than in 2021. In Charlotte, there were 39 deals representing $295.3 million in funding. That compares to more than $3.5 billion flowing into the Triangle across 182 deals.
On the state level, there were other exceptions to the big dip. South Carolina, for instance, raised $662.4 million, up from $365.7 million in 2021.
North Carolina moved up to No. 10 in the nation for venture capital funding in 2022‚ up from No. 13 in 2021. South Carolina ranked at No. 28 in 2022, up from No. 32 in the previous year.
Florida, Illinois, Michigan and Virginia also saw upticks in venture capital funding.
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 recently told American Inno that the "era of a few superstar cities dominating the innovation economy is over."
"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."
