Venture capital investment in Kentucky startups fell by more than 60% between 2021 and 2022.
According to Pitchbook, a firm that tracks venture funding totals across the country, Kentucky companies garnered just $86 million last year, compared to nearly $238 million in 2021. That's a drop of over $150 million, or almost 64%, decrease.
However, Kentucky had one "mega deal" in 2021 included, which drove that year's total up, making for a difficult comparison. Climavision, based in Louisville, debuted with a whopping $100 million investment in May of that year. There was a big investment with local ties in 2022, that being a startup called Captain — but it has its HQ in San Francisco, where its lead investor is.
So, if you want a more apples-to-apples comparison, you could take outlier Climavision out of the equation, but the refrain would be the same: VC dollars are drying up, not just in Kentucky, but across the country.
Nationally, 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.
On the state level, there were a few exceptions to the big dip.
Venture investment in Indiana grew by 46% year-over-year, from $509 million in 2021 to $743 in 2022.
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 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 us 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."
You can read more about Kentucky and Southern Indiana's biggest VC investments of 2022 here.
