New data shows that even though national venture capital activity was slightly down in 2019, the overall trend over the last decade reflects an economy in which VC funding continues to flow steadily upward as startup hubs across the country grow.
U.S.-based companies raised about $136.5 billion across more than 10,700 deals in 2019, according to a new report from the National Venture Capital Association and PitchBook, a Seattle organization that monitors VC activity. Last year's VC activity was slightly lower compared to 2018, when U.S. companies raised $140 billion across 10,500 deals.
The dip was due to a slower fourth quarter, PitchBook says. But overall, the data, released Tuesday, shows that venture capital raised by U.S. companies has been steadily rising since 2006.
California startups saw the most funding of any state, with companies raising more than $63 billion across 3,623 deals. The state had several multi-million-dollar deals from San Francisco companies such as DoorDash, which raised $700 million last year, and Databricks, which raised $400 million in October.
Following California was New York, whose startups raised more than $27 billion across 1,315 deals, and Massachusetts, which saw more than $10 billion raised in 2019 across 740 deals.
When it came to startup exits, 2019 hit a new record for U.S. VC exit value, coming in at $256.4 billion across 882 liquidity events. One of the year’s largest exits was Honey, which was acquired for $4 billion by PayPal in November.
Female-founded companies also saw record activity on both a capital and deal count basis, raising $18 billion across 2,184 deals in 2019, compared to nearly $17 billion across 2,057 deals in 2018.
VC Activity in the Great Lakes Region and Wisconsin Grows
The Great Lakes region, which PitchBook classifies as including Wisconsin, Illinois, Indiana, Michigan, Minnesota and Ohio, has seen a steady uptick in VC activity since 2010, the data shows. In 2019, Great Lakes startups raised about $5.7 billion across nearly 900 deals, up from $5 billion across 909 deals in 2018.
Meanwhile, the Midwest region, which includes Iowa, Kansas, Missouri, Nebraska, North Dakota and South Dakota, saw VC activity come in at just $800 million in 2019, compared to the $1 billion raised in 2018.
PitchBook reported that Wisconsin startups raised more than $204.8 million across 66 deals in 2019, which according to the firm’s data, is down compared to 2018, when Wisconsin startups raised more than $275 million.
However, Pitchbook’s Wisconsin data appears to be incomplete, missing large funding rounds from local upstarts like Redox and SHINE Medical Technologies. The largest Wisconsin funding round that PitchBook reports is Fetch Rewards’ $25 million round in October. But based on public announcements, Wisconsin Inno’s reporting and other available data, NorthStar Medical Technologies closed the largest funding round of 2019 at $75 million.
The Wisconsin Technology Council also tracks venture capital and says they will publish a report on final 2019 Wisconsin funding deals this spring. Based on early findings from its report, the organization’s Tech Council Investor Networks Director Bram Daelemans said he is seeing more venture capital being raised by Wisconsin startups than in years prior.
“There is definitely a lot more interest from out-of-state investors in Wisconsin and in companies based here,” Daelemans said. “We’re doing better than we’ve been ranked in the past and we are growing quite a bit.”
Much of Wisconsin’s venture capital dollars are funneled into the state’s information technology and biotech companies, Daelemans said, adding that it’s a trend he has seen for the last five years. The three largest funding rounds of 2019 were all raised by medtech or biotech companies.
But compared to other Great Lakes startup hubs, Daelemans said Wisconsin still lags in VC activity, especially when looking at Chicago, which saw VC activity near $2.2 billion in 2019. Part of the problem in Wisconsin, besides being a smaller startup market with fewer companies, is that the state’s VC community is fairly small.
“If the total number of venture capitalists in our state doubled, it would be a step in the right direction,” said Teresa Esser, the managing director of Silicon Pastures Angel Investment Network, a Milwaukee VC firm that’s backed local startups, such as Fiveable, Frontdesk, Bright Cellars and Wantable.
Each year, Silicon Pastures makes about three or four investment deals, with checks ranging from $50,000 to $200,000, Esser said.
She argues that Wisconsin lags behind its Great Lakes counterparts because it doesn’t have enough local investors and still struggles to catch the attention of coastal VCs. But becoming an investor and starting a fund is incredibly expensive. Oftentimes, new funds are started by people who already have an investing background, or were entrepreneurs themselves and profited off a startup exit.
Daelemans says one of the best methods to attracting more investors to setting up shop in Wisconsin is to better advertise the state’s strengths, but producing good business ideas should remain the priority.
“You can never have enough capital available, but if a company is VC-funding worthy, they will get it,” Daelemans said. “If a Wisconsin-based company is unable to raise VC funding, is that really because there’s not enough money, or is that because the idea or the team isn’t good enough?”
