U.S. venture funding expands reach beyond traditional centers

Venture activity this year has been gradually expanding its reach outside its traditional hubs, with the most noticeable upticks in the states of Florida, Minnesota, Virginia and Oregon.

An analysis of U.S. first-half deal-making found 20 states where deployed capital increased, even as venture capital nationwide fell 10 percent.

The biggest gainer was Florida. But Oregon and Minnesota had nice advances of their own.

“I think it proves there are great entrepreneurs and ideas in all pockets of the country,” said Bobby Franklin, president of the National Venture Capital Association.

VCJ’s analysis looked at the MoneyTree Report data, which is published quarterly by PricewaterhouseCoopers and the NVCA and is based on data from Thomson Reuters.

What it found is that VC nationwide is not democratizing away from its traditional centers but is shifting a bit. The data showed 85 percent of venture dollars through 2016’s first half went to the top five destinations in the United States, just as they did in the first six months of 2015.

These include stalwarts such as California, New York, Massachusetts and Texas. In the first half of 2015, Washington made the top five.

Deal volume also has remained concentrated. Seventy-one percent of deals went to the five busiest locations this year, similar to 2015.

Yet, venture dollars continue to look outside the usual centers as entrepreneurial activity grows nationwide. Florida, for instance, saw first-half dollars put to work quadruple to $956 million, according to the data. This includes the large $793.5 million round for Magic Leap, which accounted for the gain.

The increase in Oregon was 67 percent as $144 million was distributed. Capital going out in Minnesota rose 49 percent.

Other increases were evident in Indiana, Kentucky, Missouri, North Carolina, Pennsylvania and Virginia. Illinois and Texas, two traditional hubs, also grew.

Declines, meanwhile, took place in Colorado, Connecticut, Georgia and Utah. Another significant drop came in traditional hub Washington.

The growth of a local venture ecosystem is not a straight line, Franklin said.

“It’s a constantly evolving situation in each region,” he said. “The hope we have is whatever a regional ecosystem needs, it gets.”

Photo courtesy of ©iStock/ RomoloTavanof