California dominated the VC map in Q1

California dominated the VC map in Q1

Author: Kevin Dowd
Read time:  4 minutes
Published date:  May 28, 2024
The geographic diversification of VC has been a developing trend in recent years. Q1 2024 showed a possible reversal.

California’s claim as the hub of venture capital activity in the U.S. has rarely been stronger than it was in the first quarter of 2024. 

Startups headquartered in California brought in 59.25% of all capital raised on Carta during Q1 among states where at least 10 deals took place, a huge leap in geographic market share compared to recent history. A year ago, in Q1 2023, California startups raised 37.9% of all VC funding, and startups in the state raised 40.41% of all funding across the whole of 2023.  

Geographic distribution of VC funding Q1 2024

California was the catalyst for a broader regional shift in Q1. Across all states and all funding transactions, startups in the West census region raised 62% of all venture funding on Carta in Q1, the highest rate in any quarter since Q1 2019—and an 11-point increase over the West's share in Q4 2023. Previously, the West had claimed somewhere between 44% and 51% of all capital raised in six straight quarters.  

West took significant share of venture capital raised in Q1 2024

The West’s rise in Q1 took a bite out of the market share for each of the other three census regions. The Northeast’s share of capital raised fell from 25% to 23%. The South’s share declined from 17% to 12%, and the Midwest’s slice of the funding pie dipped from 7% to 4%. 

California has always been a dominant force in venture capital. But as so much of the tech world embraced remote work during the early days of the pandemic, there were signs that the state’s dominance (and the Bay Area’s preeminence in particular) might be slipping

Now, it appears more and more like reports of California’s demise have been greatly overstated. The rise of AI is driving a new influx of local talent. Some of the big tech players that left the region in recent years are coming back. And the latest data shows that the venture dollars are coming back, too—not that they ever really left.  

California’s comeback wasn’t the only big geographic change for venture capital funding in Q1. Here are a few other ways the map of VC is changing: 

1. A tepid quarter in Texas

In Q1, startups headquartered in Texas raised just 2.32% of all venture funding among states that saw at least 10 deals. That’s a big drop-off from the 6.45% of capital raised that Texas claimed during the whole of 2023—and an even bigger decline from the state’s 10.19% of capital raised back in Q1 2023.

To make the comparison more stark: In Q1 2023, California startups raised 37.9% of all capital, and Texas startups raised 10.19%. A year later, in Q1 2024, California’s market share was up to 59.25%, and Texas’s was down to 2.32%. 

2. The South slows down

That decline in activity in Texas has contributed to a broader decline in market share for the South census region as a whole. One year ago, in Q1 2023, the South claimed 23% of all venture capital raised in the U.S. By Q1 2024, the region’s share had declined to 12%. 

From Q3 2021 to Q1 2023, the South’s share of all capital raised increased in five out of six quarters. Now, it has declined in three out of the past four. 

Texas isn’t the only state in the region where activity has been slower in 2024. Startups in Florida raised 2.14% of capital in Q1 2024, down from 3.28% year-over-year. North Carolina’s share of all capital raised fell from 2.19% to 0.37% over the same period. 

3. More capital to Colorado

Startups headquartered in Colorado raised 3.64% of all new venture funding on Carta in Q1, the fourth-highest share of any state. Only California, Massachusetts, and New York logged a larger portion of funding. 

That’s a notable shift from recent history. During the whole of 2023, Colorado startups were responsible for 1.99% of all capital raised, which ranked seventh among all states. Back in Q1 2023, Colorado’s 1.84% market share was only the ninth-largest in the U.S. Between Q1 2023 and Q1 2024, Colorado leapfrogged Texas, Florida, Washington, and North Carolina. 

4. New York holds steady

New York was home to 11.05% of all capital raised during Q1, which ranks third among all states. Those numbers look familiar. For the full year 2023, New York logged 10.36% of cash raised, third-most among all states. And back in Q1 2023, startups in the state raised 10.98% of all cash, again ranking third on the state leaderboard.  

New York has proven a bit more resilient over the past year than Massachusetts, the other major venture hub in the Northeast. There, the state’s market share declined from 14.66% in Q1 2023 to 11.21% in Q1 2024. 

5. A retreat from the Northeast

After climbing all the way to 30% in Q4 2022, the Northeast’s share of all venture capital raised in the U.S. has now declined in five of the past six quarters. It fell to 23% during Q1 2024, the lowest point in two years. 

The past quarter was a particularly quiet one for New Jersey. Startups from the Garden State claimed just 0.45% of capital raised during Q1 2024, compared to 1.86% of all capital raised throughout 2023. 

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Kevin Dowd
Author: Kevin Dowd
Kevin Dowd is a senior writer covering the private markets. Prior to joining Carta, he reported on venture capital and private equity at Forbes, where he wrote the Deal Flow newsletter, and at PitchBook, where he wrote The Weekend Pitch.