It's no secret that the biggest tranches of venture capital dollars can be found on the coasts.
For years, 75% of venture capital investments went to companies in California, New York and Massachusetts, according to a recent report from Revolution's Rise of the Rest based on data from PitchBook.
Despite 2021 being a record year for the VC industry, the Bay Area's share of VC investments is due to fall below 30% for the first time in over a decade. That decline is leading coastal investors to up the ante with more frequent, and larger investments in Minnesota-based startups.
Between 2011 and September 2021, Bay Area investors invested $1.3 billion in startups just in Minneapolis. Meanwhile, New York-based investors were responsible for $704 million. In 2021 alone, two Minnesota startups each closed on $150 million rounds led by coastal investors.
In August, Minneapolis-based Suma Brands announced a $150 million Series A round led by New York-based Pace Capital and Material.
Andrew Savage, Suma's CEO and founder, told the Business Journal he would love to have Minnesota-based investors on board, but "there just tends to be more capital at that scale on the coasts."
Minnesota's other blockbuster VC deal came in July when Arctic Wolf Networks Inc. raised a $150 million round led by Greenwich, Conn.-based Viking Global Investors and Owl Rock, a division of New York-based Blue Owl Capital. The Eden Prairie-based cybersecurity firm has also scored large investments from New York-based Blue Cloud Ventures and Palo Alto, Calif.-based Stereo Capital.
Outside of the $150 million threshold, Branch, a Minneapolis-based tech firm aimed at helping employers speed up paydays for workers, raised $48 million. That Series B round, which closed in August, was led by New York-based investment firm Addition.
In other investing news, Washington, D.C.-based Rise of the Rest revealed seed and early-stage investments into Minneapolis-based startups in 2021 totaled over $301 million across 46 deals as of Sept. 1. That number is already higher than the $261 million raised over 42 deals last year. However, it falls well short of the record $614 million raised through 66 deals in 2018.
