Post-pandemic, the value of venture capital funding rounds rose in many US inland states, while key coastal states showed a decline, driven by remote work and and attempts to revitalize the US manufacturing base.

Arkansas posted the biggest jump in deal value at $748.5 million in 2023 from $3.2 million in 2019, data from S&P Global Market Intelligence shows. Other inland states that registered at least a 100% surge in venture capital funding included Alabama, Iowa, Wyoming, Nevada, Kentucky, Nebraska, Wisconsin and New Mexico.

Venture investments in California, the state that has traditionally pulled in the most venture capital, were down 30% to $41.28 billion during the measured period.

On the East Coast, venture-backed funding rounds in New York state were down 24% to roughly $12.25 billion. But Massachusetts was resilient, having seen venture capital funding rise to $11.72 billion in 2023, up 31.3% from 2019.

The spread of remote work during the pandemic has contributed to a change in the geographic distribution of venture capital funding in coastal and inland states, Francois Chadwick, Emerging Giants practice leader at KPMG, told Market Intelligence.

When the pandemic hit, technology companies allowed their engineers to work remotely, and some migrated to states they personally preferred to live, only to start their own companies and create local business communities, Chadwick said.

"The funding has gone to where the founders of these companies are," Chadwick said. "Whether you're a venture capital fund or a private equity fund, the money is now going to where the talent is. It's less about the talent [going] to the money."

Government efforts to bring back manufacturing to the US, which can attract parts of the supply chain to relocate nearby, could also be a factor in attracting venture capital, Chadwick said.

"When you're thinking about venture capital, you're looking at deploying that venture capital in the most efficient way possible. If the macroenvironment and the legislation is such that is sort of assisting folks to do more manufacturing in the US at a lower cost, then that's where the capital will be deployed."

The number of funding rounds tended to follow the direction of investment value during the period.

Largest percentage gains

Of the states that received at least $1 billion of investments in 2019, Georgia emerged with the highest percentage change in deal value at 127.6% to approximately $2.80 billion in 2023. Illinois followed with 83.3% growth in venture capital investments, while Florida recorded 45.8% growth in venture funding rounds during the measured period.

The vast majority of funding rounds in all three states from 2020 to 2023 were in the application software sector, according to Market Intelligence data.

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Ohio, Virginia, North Carolina, Utah, Arizona and Minnesota saw venture capital investments fall below $1 billion during the period.

Overall, venture capital funding rounds in the US decreased to roughly $103.42 billion in 2023, an 18.3% decline from the $126.57 billion in total funding rounds in 2019.