Venture Capital

Venture capital invested as a percentage of Gross State Product.

WHY IS THIS IMPORTANT? In relative terms, venture capital (funds invested in new and unproven businesses) amounts to a small share of the overall capital markets, but its value goes beyond a simple dollar figure. Venture capital spurs growth at the critical early stages of growing companies’ development. Moreover, venture capitalists don’t just throw their money at startup companies hoping to get lucky and pick a winner. They become involved as board members and management advisors, suggesting strategic partnerships, and helping to refine business plans. And venture-based companies are a key source of job growth—employment in venture-backed companies increased 34 percent annually between 1991 and 1995, while employment in Fortune 500 companies declined 3.6 percent. In the nation as a whole, venture capital investments have increased from an average of $6 billion in the early 1980s to $12 billion in 1997 (in constant 1992 dollars), and from 0.10 percent to 0.16 percent of GDP. In 1997, it was disbursed to some 2,485 companies, five times more than in 1980.27

THE RANKINGS: Venture capital investments are highly concentrated in a few states, particularly states with strong university engineering and science programs and an existing base of high-tech companies, both of which can be the source of many entrepreneurial start-ups or spinoffs. But as venture capital investments have increased, even middle-ranking states obtain significant amounts of venture capital.

STATES BY RANK
Rank	State	Score
1	Massachusetts	0.62%
2	California	0.50%
3	Colorado	0.34%
4	New Hampshire	0.29%
5	Washington	0.24%
6	Tennessee	0.18%
7	Minnesota	0.17%
8	Georgia	0.16%
9	Texas	0.16%
10	North Carolina	0.15%
11	New Jersey	0.14%
12	Florida	0.13%
13	Arizona	0.12%
14	Connecticut	0.11%
15	Illinois	0.11%
16	Missouri	0.11%
17	Pennsylvania	0.11%
18	Oregon	0.11%
19	Maryland	0.10%
20	South Carolina	0.10%
21	Virginia	0.10%
22	Utah	0.09%
23	Kentucky	0.08%
24	New York	0.07%
25	Montana	0.07%
26	Kansas	0.07%
27	Wisconsin	0.07%
28	Nevada	0.07%
29	Ohio	0.06%
30	Hawaii	0.04%
31	Michigan	0.04%
32	Maine	0.03%
33	Indiana	0.03%
34	Alabama	0.03%
35	Iowa	0.02%
36	Louisiana	0.01%
37	Idaho	0.01%
38	Oklahoma	0.01%
39	Vermont	0.01%
40	Delaware	0.00%
41	Mississippi	0.00%
42	Nebraska	0.00%
43	Rhode Island	0.00%
44	North Dakota	0.00%
45	Alaska	0.00%
46	New Mexico	0.00%
47	Arkansas	0.00%
48	West Virginia	0.00%
49	South Dakota	0.00%
50	Wyoming	0.00%

	U.S. average	0.17%

ALPHABETICALLY
State	Rank	Score
Alabama	34	0.03%
Alaska	45	0.00%
Arizona	13	0.12%
Arkansas	47	0.00%
California	2	0.50%
Colorado	3	0.34%
Connecticut	14	0.11%
Delaware	40	0.00%
Florida	12	0.13%
Georgia	8	0.16%
Hawaii	30	0.04%
Idaho	37	0.01%
Illinois	15	0.11%
Indiana	33	0.03%
Iowa	35	0.02%
Kansas	26	0.07%
Kentucky	23	0.08%
Louisiana	36	0.01%
Maine	32	0.03%
Maryland	19	0.10%
Massachusetts	1	0.62%
Michigan	31	0.04%
Minnesota	7	0.17%
Mississippi	41	0.00%
Missouri	16	0.11%
Montana	25	0.07%
Nebraska	42	0.00%
Nevada	28	0.07%
New Hampshire	4	0.29%
New Jersey	11	0.14%
New Mexico	46	0.00%
New York	24	0.07%
North Carolina	10	0.15%
North Dakota	44	0.00%
Ohio	29	0.06%
Oklahoma	38	0.01%
Oregon	18	0.11%
Pennsylvania	17	0.11%
Rhode Island	43	0.00%
South Carolina	20	0.10%
South Dakota	49	0.00%
Tennessee	6	0.18%
Texas	9	0.16%
Utah	22	0.09%
Vermont	39	0.01%
Virginia	21	0.10%
Washington	5	0.24%
West Virginia	48	0.00%
Wisconsin	27	0.07%
Wyoming	50	0.00%

Source: Pricewaterhouse Coopers LLP, 1997 data.

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Technology, Innovation, and New Economy Project
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