Venture capital investment slumped last year — except for emerging tech markets like Orlando.
Nationally, venture capital investors pumped $238 billion into U.S. startups in 2022 — down 31% from 2021's record haul of $345 billion, according to Pitchbook Data Inc., a firm that tracks venture funding totals across the country.
However, some states were the exception. That included Florida, where startups raised $6.8 billion in 2022 compared to $6.6 billion in 2021.
Here's a closer look at how each state fared for venture capital investment in 2022:
In metro Orlando, companies raised $477.1 million, up 14% from the $418.5 million raised in 2021, according to PitchBook and the National Venture Capital Association. While startups raised more money last year in Miami ($5.4 billion) and Tampa ($543.7 million), Orlando saw the biggest year-over-year increase among the Sunshine State's four major metros.
In addition to Florida, North Carolina, Illinois, Michigan and Virginia each saw funding upticks in 2022. Markets like Orlando, Miami and Raleigh drove those gains.
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.
For an example of Orlando and Florida's growing popularity, look at Windermere-based venture fund Backswing Ventures. Managing Partner Kyle Asman raised a fund in 2020 when he lived in New Jersey and invested in zero Florida companies. This year, he's raising a new $15 million fund, and Asman recently told Orlando Inno he already is in talks with companies in Orlando, Brevard County and Boca Raton.
"Florida has blown up in last three years," Asman said.
It's a sentiment shared by Steve Case — AOL co-founder, founder of VC firm Revolution and founder of the Rise of the Rest fund, which invests in startups outside of traditional tech hubs. Case and Rise of the Rest visited Orlando in 2019.
The "era of a few superstar cities dominating the innovation economy is over," he told American Inno 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.' "
While leaders of Central Florida seed funds and venture capital firms have told Orlando Inno raising capital will be tougher for companies in 2023 due to economic headwinds, Orlando-based DeepWork Capital LLC Founding Managing Partner Kathy Chiu added that local startups may be better equipped for such a situation.
"One silver lining for markets like Florida is that startups here never experienced the level of frothiness experienced in, say, the Bay Area," Chiu said. "As a result, entrepreneurs here tend to be capital-efficient, which is a great survivor trait in this market."
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