While Wisconsin startups raised fewer venture capital dollars last year compared with the record-setting year of 2021, the state was not alone in experiencing a decline in VC funding and it didn't fare as poorly as the nation as a whole.
Wisconsin startups raised $526 million in 2022, down 11% compared with $592 million in 2021, according to a Wisconsin Inno analysis of data from Pitchbook, a firm that tracks venture funding totals across the country. Many other states also posted venture funding declines last year, with a few exceptions.
See the chart at the bottom of the article to see how Wisconsin stacked up to other U.S. states.
The Wisconsin Technology Council also tracks venture capital financing in the state and is due to release 2022 numbers in its annual Wisconsin Portfolio report. The organization's figures are higher than Pitchbook's; it reported that Wisconsin entrepreneurs raised $868 million in 2021, up from its earlier estimate of $811 million.
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 some exceptions to the big dip. 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. Markets like Miami, Orlando, Tampa and Raleigh drove those gains.
It's important to note, however, 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.
Compared with other states, Wisconsin was roughly on par with Vermont and Nebraska in terms of the total venture capital dollars startups in the state raised in 2022.
In terms of other Midwest states, Wisconsin still lags behind Illinois, Minnesota, Ohio, Michigan and Indiana when it comes to VC funding, according to Pitchbook data. On the other hand, Wisconsin startups raised more VC funding in 2022 than startups in Missouri, Kansas and Iowa.
Meanwhile, 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. In an interview with American Inno, he said the "era of a few superstar cities dominating the innovation economy is over."
Case visited Milwaukee last fall and met with entrepreneurs, investors and stakeholders in the city's startup scene. At the end of the day, he said Milwaukee needs to "step up its game" in order to grow its innovation ecosystem.
