Startup funding in traditional tech epicenters like California and New York fell around 40 percent last year while North Carolina maintained its status as a hub for new businesses.
Venture capital investors pumped $238 billion into U.S. startups in 2022 – a 31 percent decline from 2021's record haul of $345 billion, according to Pitchbook, a firm that tracks venture funding totals across the country.
The Tar Heel state was one of a handful of states that saw funding upticks in 2022. In North Carolina, startups – driven by the Raleigh region – raised $4.3 billion, up from $3.85 billion in 2021. That figure includes a $2 billion haul by Cary's Epic Games last April.
The Council for Entrepreneurial Development in Durham recently released its annual Venture Report, showing that 246 companies in the state raised funding in 2022. That’s 25 more companies than in 2021. And more than $3.5 billion flowed into the Triangle across 182 deals.
California exodus funnels West Coast investors to Triangle startups
On the state level, there were other exceptions to the big dip. Florida, Illinois, Michigan and Virginia also saw upticks.
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 percent decline – from $162 billion in 2021 to $104 billion in 2022. New York (down 40 percent) and Massachusetts (down 37 percent) 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 me 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."
