As startup funding dips nationwide, smaller cities — like Madison — see growth

Venture capital for startups is down this year both nationally and among the major U.S. startup hubs, but a new study shows smaller markets — including Madison — have seen increases in venture capital financings.

Nationwide, startups have laid off thousands of workers this year in an economy marked by rising interest rates, high inflation and a struggling stock market. In this environment, U.S. startups received $58.7 billion in funding last quarter, down 18.6% compared with the first quarter and down 20.8% year over year, the report found.

But Madison startups raised $299 million during the second quarter of 2022 — a nearly 800% increase compared with its average quarterly funding amount over the prior 12 months, according to a recent report from investment and research firm York Investments LLC of Manchester, New Hamshire.

That growth was driven primarily by Madison-based consumer loyalty app Fetch Rewards, which raised $240 million in a funding round announced in April.

Six other Madison companies landed Q2 2022 funding rounds, according to the report. Medical data startup Moxe Health raised $30 million and health care artificial intelligence innovator EnsoData raised $20 million. Both companies announced those deals in June.

Based on its Q2 2022 venture capital activity, Madison ranked No. 3 on the York Investments list of the fastest-growing U.S. startups. See the top 10 listed below.

Although startups in San Francisco, New York and Boston have seen a drop in funding this year compared with 2021, companies in those markets still raised the most venture capital last quarter. In Q2 2022, San Francisco startups landed $9.8 billion across 278 financing rounds, New York companies raised $5.3 billion in 248 rounds and Boston firms raised $2.4 billion across 56 rounds, according to the report.

Fastest-growing U.S. startup cities in Q2 2022

Source: York Investments Q2 2022 study