Share of U.S. Venture Capital Dollars, Deals by State, 2007-2012

After dipping just under 50 percent in 2011, California reclaimed its spot as the site of a majority of U.S. venture capital investment last year, according to the National Venture Capital Association/PricewaterhouseCoopers Moneytree Survey. About 53 percent of all U.S. venture capital dollars were invested in California companies in 2012, the largest share captured by the state since the annual survey began in 1995. The total share of all venture dollars invested in the top five states also reached an all-time high last year, with California, Massachusetts, New York, Texas and Washington capturing 78.5 percent of all U.S. investment.

SSTI has prepared tables showing each states' share of total U.S. venture capital dollars and deals, 2007-2012, based on data from the PwC/NVCA Moneytree report. This is the final article in a three-part series on venture investing trends. Previous installments examined total venture dollars and deals by state, per capita investment activity and average deal size. Download the tables in Excel format to get access to all of the data.

Over the past two decades, the U.S. venture capital (VC) industry has been subject to two major crashes (2001 and 2008), surrounded by periods of modest growth. In 1995, total U.S. VC dollars were at about $8 billion, according to the Moneytree Survey, rising steadily to about $21.5 billion in 1998, and then exploding to about $105 billion during the dot com bubble years of 1999 and 2000. Activity gradually fell to a low of $20 billion in 2003, and then resumed a steady climb to $32.1 billion in 2007, only to drop again to $20.5 billion following the 2008 crash. This left U.S. investment dollars at roughly the same level as the years just before and just after the dot com bubble. Venture investment then grew modestly in 2010, more impressively in 2011 and then dropped a bit in 2012, when VC dollars totaled about $26.5 billion. (Please note that some of these annual figures may not match up with past venture statistics prepared by SSTI. The Moneytree report for past years is often updated with newly available data on venture investment. These numbers reflect the latest data available on the Moneytree site.)

In parallel to this trend of modest growth with periodic bubbles and crashes, another trend has driven the geographic dispersion of VC activity. Though venture capital has become of national interest, and many states and regions have introduced policies intended to increase investment, VC activity has become more concentrated in a few key states. California companies received about 40 percent of all VC dollars and 36 percent of VC deals in 1995. In 2012, these companies received 53.1 percent of VC dollars and 41.1 percent of deals. With a few exceptions, California's share of national venture capital dollars has grown modestly every year, though its share of U.S. deals has been a bit more unpredictable. The state's 2012 share represents an all-time high since 1995.

No other major venture capital state has had such a reliable increase in VC activity. Massachusetts, the perennial second hot spot for venture capital (though the top state for per capita investment) received about 11.4 percent of U.S. VC dollars in 2012. The state's highest share of VC, however, came in the years following the dot com crash. In 2003, Massachusetts companies received almost 14 percent of U.S. investment dollars. The next two states, New York and Texas, have fluctuated, with New York becoming a larger presence and Texas diminishing a bit. Washington state has had a similarly unsteady path, falling to less than a percent of U.S. venture dollars in 2011, but climbing to 3.5 percent last year.

Despite these fluctuations, the rise of the country's top five states has been even more impressive than California's rise on its own. In 2012, these states represented about 78.5 percent of all U.S. venture activity, up from 73.3 percent in 2007. It becomes more difficult to measure the importance of the top five states before 2007, since a few of the states in question have dropped in and out of the top tier, but, in general, these VC hotspots seem to dominate increasingly (or before to) the venture scene. Though venture deals have been a bit more equitably distributed than dollars, these states also represent about 70 percent of all deals secured in 2012.

Though total U.S. venture activity has been subject to bubbles, crashes and market corrections, California's share of that activity and the share represented by the top five states had grown steadily through years of economic turbulence. Many regions outside of those five state have been able to foster venture capital activity focused on home-grown companies, but none appear to be growing at a level that would affect the national total.