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Rise of rest continues in 2018, but VC hubs seize the big dollars

Venture capital found itself flooding into new communities across the country in 2018, but the industry’s big dollars remained concentrated in the investing centers of California, New York and Massachusetts.

The year was one of so-called democratization, with remarkable investment growth in unexpected places, including Connecticut, North Carolina, Oregon, Tennessee and Delaware. Capital going to work in these locations and others more than doubled.

Whether this diversification in U.S. investing continues in 2019 is, of course, another matter. Investment trends can swing dramatically with one or several prominent deals. Still, the snapshot taken at the end of 2018 shows the rise of the rest underway.

At the same time, the industry’s big dollars remain concentrated in the three long-established hubs, according to data from Dow Jones VentureSource.

The year saw 79 percent of venture dollars allocated to startups in these three spots, up from 63 percent in 2007, the data show. While expanding round sizes help explain this rise, deal volume also has grown substantially over the period.

The data find capital invested in California climbed 82 percent last year to $75.7 billion. This was significantly faster than venture capital nationwide, which jumped 50 percent to $130.4 billion.

Capital placed in Massachusetts grew 51 percent, while dollars deployed in the New York Metro rose a smaller 3.6 percent after a strong 2017.

It is clear, nonetheless, that GPs find plenty to be interested about in second-tier markets. Connecticut saw $583 million of capital put to work, while North Carolina topped $2.6 billion, VentureSource found.

Other communities with strong growth include Iowa, Kansas, Oklahoma and Wisconsin, though venture communities there are still rather small. Ohio, New Jersey, Colorado and Indiana also posted solid numbers.

Florida, Illinois and the District of Columbia saw declines, while Georgia, Utah and Virginia were relatively flat.

Washington state turned in a respectable year with 32 percent growth.