Venture capital investors pumped $238 billion into U.S. startups in 2022 — a 31% decline from 2021's record haul of $345 billion.
That's according to an analysis by Pitchbook, a firm that tracks venture funding totals across the country.
The dip in funding has contributed to layoffs, spending cuts and a host of challenges for startups around the nation in 2023 — and it's not the only hurdle those companies are facing in what remains an uncertain economic climate.
But despite the negative trend line nationally, a state-by-state look shows some exceptions.
Florida and North Carolina, home to high-growth metros with expanding innovation ecosystems, each saw funding upticks in 2022 — as did Illinois, Michigan and Virginia.
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 metro or even state 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.
The uptick in funding in states like Florida and North Carolina comes as traditional startup hubs often saw their funding fall precipitously from the lofty heights of 2021.
California, which draws the most venture funding of any state 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."
